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March 18, 2018, 1:16 p.m. EDT

Zscaler shares more than double after IPO as CEO touts cloud-based security

Zscaler shares skyrocket 106% after IPO prices at $16 a share

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By Wallace Witkowski, MarketWatch

Bloomberg News/Landov
Jay Chaudry, founder and chief executive officer of Zscaler Inc.

Zscaler Inc. shares more than doubled on their first day of trading Friday after the cloud-based security company priced its initial public offering above its already-increased range late Thursday.

That rush into the stock is a testament to Zscaler /zigman2/quotes/203585803/composite ZS +1.75%  filling a wide need for today’s businesses, which can no longer rely upon solely upon traditional network security as more and more enterprise applications move to the cloud, Zscaler chief executive and founder Jay Chaudhry told MarketWatch.

Zscaler shares surged 106% to close at $33 on volume of 16.8 million shares Friday. The company sold 12 million shares with Morgan Stanley and Goldman Sachs acting as lead underwriters in the first Silicon Valley tech unicorn to go public in 2018. With 117.3 million shares outstanding, Friday’s stock surge values Zscaler at a market cap of $3.87 billion.

Chaudhry said the “moat” system of securing corporate networks no longer applies given the mobility of today’s workforce, where most system threats are lurking outside of a company’s network security. With many software applications moving to the cloud, the internet has become a de facto corporate network, which is like the Wild West, Chaudhry said.

“If you can’t control the network, you can’t secure the network,” Chaudhry told MarketWatch. “So doing network security is silly in today’s world.”

With 100 data centers across the globe, Zscaler’s service acts like a series of security checkpoints through which companies can run their traffic .

“Think of us like an international airport that has to inspect the people moving in and out...without slowing people down,” Chaudhry said.

Read: Zscaler IPO: 5 things to know about the first big tech IPO of 2018

While Zscalar lists Cisco Systems Inc. /zigman2/quotes/209509471/composite CSCO -0.75%  and Symantec Corp.  as major competitors in its disclosures, Chaudhry said Zscaler’s advantage in cloud-based security is much like Salesforce.com Inc.’s /zigman2/quotes/200515854/composite CRM +1.62%  when it took on customer-relations management software in 1999.

“To build sometrhing for the cloud you really need to build from a clean slate,” Chaudhry said. “What [Cisco and Symantec have] is all the technology that they’re trying to retrofit for the new world. It’s very, very hard to do that.”

US : U.S.: Nasdaq
$ 217.36
+3.73 +1.75%
Volume: 1.45M
Jan. 22, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$29.17 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 44.77
-0.34 -0.75%
Volume: 14.64M
Jan. 22, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$189.18 billion
Rev. per Employee
$ 225.77
+3.60 +1.62%
Volume: 10.19M
Jan. 22, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$206.58 billion
Rev. per Employee

Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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