What changed in this filing

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Item 1. Business

2021-02-19 compared with 2020-02-26 · 99 added, 62 removed, 193 unchanged (45% of the section changed)

Fortinet is a global leader in cybersecurity solutions provided to a wide variety of organizations, such as enterprises, communication service providers, government organizations and small businesses.

Fortinet is a global leader in cybersecurity solutions provided to a wide variety of organizations, including enterprises, communication service providers, government organizations and small businesses.

Our cybersecurity solutions are designed to provide broad visibility and segmentation of the digital attack surface through our integrated Fortinet Security Fabric platform, which features automated protection, detection and response.

The focus areas of our business consist of:

Network Security —We derive a majority of product sales from our FortiGate network security appliances.

Our FortiGate network security appliances include a broad set of built-in security and networking features and functionalities, including firewall, next-generation firewall, secure web gateway, secure sockets layer (“ SSL ”) inspection, software-defined wide-area network (“ SD-WAN ”), intrusion prevention, SSL data leak prevention, virtual private network (“ VPN ”), switch and wireless controller and wide area network edge.

• Security-Driven Networking —We derive a majority of product sales from our FortiGate network security appliances.

Our FortiGate network security appliances include a broad set of built-in security and networking features and functionalities, including firewall, next-generation firewall, secure web gateway, secure sockets layer (“SSL”) inspection, software-defined wide area network (“SD-WAN”), intrusion prevention system (“IPS”), sandboxing, data leak prevention, virtual private network (“VPN”), switch and wireless controller and wide area network (“WAN”) edge.

Our network security appliances are managed by our FortiOS network operating system, which provides the foundation for FortiGate security functions.

We enhance the performance of our network security appliances from branch to data center by designing and implementing Security Processing Unit (“ SPU ”) technology within our appliances, enabling us to add security and network functionality with minimal impact to network throughput performance.

Infrastructure Security —The Fortinet Security Fabric platform is a broad, automated and integrated security platform that extends beyond the network to cover other attack vectors.

Other infrastructure solutions covered include Secure Access (Wi-Fi and switch).

Cloud Security —We help customers connect securely to and across their hybrid, public and private cloud environments by offering security through our virtual firewall and other software products in public and private cloud environments.

Our cloud security solutions, including virtual appliances and hosted solutions, extend the core capabilities of the Fortinet Security Fabric platform to provide businesses with the same level of cybersecurity and threat intelligence in and across cloud environments that they receive on their physical networks.

Fortinet cloud security offerings are available across all major cloud providers, including Amazon Web Services, Microsoft Azure, Google Cloud, Oracle Cloud, Alibaba Cloud and IBM Cloud .

We enhance the performance of our network security appliances from branch to data center by designing and implementing Security Processing Units (“SPUs”) technology within our appliances, enabling us to add security and network functionality with minimal impact to network throughput performance.

• Infrastructure Security —The Fortinet Security Fabric platform extends beyond the network to cover other attack vectors.

Other infrastructure solutions covered include teleworker and remote security solutions such as FortiAuthenticator, FortiClient and FortiToken, as well as Secure Access (Wi-Fi and switch).

• Dynamic Cloud Security —We help customers connect securely to and across their individual, hybrid and multi-cloud environments by offering security through our virtual firewall and other software products and through integrated capabilities with major cloud platforms.

Our public and private cloud security solutions, including virtual appliances and hosted solutions, extend the core capabilities of the Fortinet Security Fabric platform in and across cloud environments, delivering security that follows their applications and data.

Our Secure SD-WAN for Multi-Cloud solution automates deployment of an overlay network across different cloud networks and offers visibility, control and centralized management that integrates functionality across multiple cloud environments.

Our Cloud Security portfolio also includes securing applications, including email and web.

Endpoint Protection, Internet of Things and Operational Technology Security —We protect end-customers from advanced threats that target their devices and the data that reside on them through our advanced endpoint solutions that provide core endpoint protection, advanced threat protection, incident monitoring, and response.

Additionally, the proliferation of Internet of Things (“ IoT ”) and the digitization of Operational Technology (“ OT ”) devices has generated new opportunities for us to grow our business.

Fortinet cloud security offerings are available for deployment in major public and private cloud environments, including Amazon Web Services, Microsoft Azure, Google Cloud, Oracle Cloud, Alibaba Cloud, IBM Cloud and VMWare Cloud.

We also offer managed IPS and web application firewall (“WAF”) rules delivered by FortiGuard Labs as an overlay service to native security offerings offered by Amazon Web Services.

• Endpoint Protection, Internet of Things (“IoT”) and Operational Technology (“OT”) Security —We protect end-customers from advanced threats that target their devices and the data that reside on them through our advanced endpoint solutions that provide core endpoint protection, advanced threat protection, incident monitoring, and response.

Additionally, the proliferation of IoT and OT devices has generated new opportunities for us to grow our business.

We offer network access control solutions that provide visibility, control and automated event responses in order to secure IoT devices.

We also develop and provide Artificial Intelligence (“ AI ”)-driven security operations solutions, including FortiGuard security services, that can be applied across the entire Fortinet Security Fabric platform .

These solutions help customers better secure their environments by delivering deeper intelligence and insights and by reducing the gaps in security skills and resources that are present in many organizations.

In addition to our security solutions, our customers, channel partners and end-customers may purchase FortiGuard and other security subscription services to receive threat intelligence updates, FortiCare technical support services across all of our products and the support of Technical Account Managers, Resident Engineers and professional service consultants for implementations or training services.

• AI-Driven Security Operations —We develop and provide Artificial Intelligence (“AI”) driven security operations solutions, including FortiGuard and other security subscription services, endpoint detection and response, and our security orchestration, automation and response (“SOAR”) capabilities and solutions, that can be applied across the entire Fortinet Security Fabric platform.

These solutions deliver intelligence and insights.

In addition to our security solutions, our customers may purchase FortiGuard and other security subscription services to receive threat intelligence updates and protection updates delivered by FortiGuard Labs, FortiCare technical support services and the support of Technical Account Managers, Resident Engineers and professional service consultants for implementations or training services.

During our year ended December 31, 2020, we generated total revenue of $2.59 billion and net income of $488.5 million.

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The Fortinet Security Fabric platform helps organizations secure their environments and reduce their security and network complexities.

The Fortinet Security Fabric platform has an open architecture designed to connect Fortinet solutions and third-party solutions into a single ecosystem.

Our proprietary SPU hardware architecture, FortiOS operating system and associated security and networking functions are combined to form the Fortinet Security Fabric platform .

This approach to security ties together discrete security solutions into an integrated whole, which enables our products to perform security processing for networks with high throughput requirements across a broad threat landscape.

Our proprietary SPU s are Application-Specific Integrated Circuits (“ ASIC s”) that include (i) the Content Processor (“ SPU CP ”), (ii) the Network Processor (“ SPU NP ”) and (iii) the System-on-a-Chip (“ SPU SoC ”).

The Fortinet Security Fabric platform has an open architecture designed to connect Fortinet solutions and third-party solutions into a single ecosystem, enabling integration and automation.

Our product offerings consist of our FortiGate network security product family and our non-FortiGate products.

Our FortiGate hardware and software licenses are sold with a set of security services in addition to networking features and are run using our proprietary FortiOS operating system.

Our security services are enabled by FortiGuard Labs, which provides threat research and artificial intelligence capabilities from a cloud network to deliver protection services to each FortiGate appliance and virtual machine that is registered by the end-customer.

All these are combined to form the Fortinet Security Fabric platform, which is an approach to security that ties discrete security solutions together into an integrated whole.

Our proprietary SPUs are Application-Specific Integrated Circuits (“ASICs”) that include (i) the Content Processor (“SPU CP”), (ii) the Network Processor (“SPU NP”) and (iii) the System-on-a-Chip (“SPU SoC”).

Each successive generation of SPU adds network speed and the capacity to perform security functions.

Our SPU s are designed to enhance the security processing capabilities implemented in software by accelerating computationally intensive tasks such as firewall policy enforcement, SD-WAN , network address translation, Intrusion Prevention Systems (“ IPS ”) threat detection and encryption.

Our SPUs are designed to enhance the security processing capabilities implemented in software by accelerating computationally intensive tasks such as firewall policy enforcement, SD-WAN, network address translation, IPS, threat detection and encryption.

The use of SPUs allows our appliances to deliver security functionality with minimal impact to network throughput performance, which we believe delivers a lower total cost of ownership (“TCO”) to our customers.

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Mid-range FortiGate products use a central processing unit (“CPU”) and include the SPU NP and SPU CP hardware acceleration.

The high-end FortiGate products use multiple CPU s, SPU CP s and SPU NP s.

Our proprietary FortiOS operating system provides the foundation for the operation of all FortiGate appliances, whether physical, virtual, private or public cloud based, and is at the heart of the Fortinet Security Fabric platform .

The high-end FortiGate products use multiple CPUs, SPU CPs and SPU NPs.

Our proprietary FortiOS operating system provides the foundation for the operation of all FortiGate network security appliances, whether physical, virtual, private- or public-cloud based.

We make regular updates to FortiOS available through our FortiCare support services.

We have made updates to our FortiOS 7.0, as we aim to create a platform that will cover data centers, clouds, edge computing endpoints and networks.

Fortinet Security Fabric is powered by FortiOS.

The security and networking capabilities of the Fortinet Security Fabric platform are controlled through FortiOS.

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Key high-level functions and capabilities of FortiOS include:

key enablement for the Fortinet Security Fabric platform architecture;

• enablement for the Fortinet Security Fabric platform architecture;

• optionality to configure FortiGate appliances into different security environments, such as our Internal Network Firewall, Next-Generation Firewall and Data Center Firewall;

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• extension of the Fortinet Security Fabric platform through direct management of FortiSwitch and FortiAP devices;

key network functions such as routing and deployment modes (network routing, transparent, sniffer, etc.);

• network functions such as routing and deployment modes (network routing, transparent, sniffer, etc.);

• the ability to deploy and orchestrate SD-WAN instances;

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FortiOS also provides capabilities for the logging of traffic for forensic analysis purposes, which are particularly important for regulatory compliance initiatives such as payment card industry data security standards.

FortiOS is designed to help control network traffic in order to optimize performance by including functionality such as packet classification, queue disciplines, policy enforcement, congestion management, wide-area network (“WAN”) optimization and caching.

These features enable administrators to set the appropriate configurations and policies that meet their infrastructure needs.

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With over 35 models in the FortiGate product line, FortiGate is designed to address security requirements for small- to medium-sized businesses, large enterprises and government organizations worldwide.

Typically, all FortiGate hardware appliances include our SPU s to accelerate content and network security features implemented within FortiOS.

Typically, all FortiGate hardware appliances include our SPUs to accelerate content and network security features implemented within FortiOS.

The significant differences between each model are the performance and scalability targets each model is designed to meet, while the security features and associated services offered are common throughout all models.

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Fortinet Security Fabric Platform and Non-FortiGate Products

As part of the Fortinet Security Fabric platform , we offer products that provide network security, end point security, cloud security, web-based application security, identity and access management, sandbox protection and email security.

As part of the Fortinet Security Fabric platform, we offer products that provide network security, endpoint security, cloud security, web-based application security, identity and access management, sandbox protection and email security.

The integration of devices using open standards, common operating systems, and unified management platforms enables the sharing and correlation of real-time threat intelligence.

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FortiAPs create a scalable and secure access layer for connecting wireless devices such as computers, laptops, cell phones and tablets, as well as IoT devices.

FortiExtender —Our FortiExtender appliance provides a WAN connection to our FortiGate products using wireless broadband networks.

End-customers that use multiple WAN connections, including SD-WAN, can use FortiExtender for one of those WAN links.

FortiExtender can also be used as the primary connection for a location where wireless is the preferred broadband option.

• FortiAnalyzer —Our FortiAnalyzer family of products provides centralized network logging, analyzing and reporting solutions that securely aggregate content and log data from our FortiGate devices, other Fortinet products and third-party devices to enable network logging, analysis and reporting.

• FortiGate-VM — FortiGate-VM extends the Fortinet Security Fabric through the cloud on-ramp into the cloud, enabling customers to achieve security-driven networking within the cloud and between clouds and hybrid clouds.

FortiGate-VM is powered by Fortinet vSPU (virtual Security Processing Unit) to deliver accelerated security and performance with minimal impact to performance.

Our Cloud Networking solution enables better, more secure application experiences for users and branch offices by providing for encrypted data transports, granular segmentation and application-layer protection against advanced threats, and seamless overlay network with uniform policies across multi-clouds.

FortiGate-VM is available for all major cloud providers, hypervisors and software-defined network (“SDN”) platforms.

• FortiManager —Our FortiManager family of products provides a central and scalable management solution for our FortiGate products, including software updates, configuration, policy settings and security updates.

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When malicious code is identified, a signature can be generated locally for distribution across the Fortinet Security Fabric platform.

FortiSIEM —Our FortiSIEM family of software solutions provides a cloud-ready security information and event management (“SIEM”) solution.

FortiSIEM unifies analytics that are traditionally monitored discretely, parses the information and then processes it in an event-based analytics engine for handling real-time searches, rules, dashboards and ad-hoc queries.

This unification of diverse sources of data enables organizations to create comprehensive dashboards and reports to identify root causes of threats, and take the steps necessary to remediate and prevent them in the future.

FortiToken and FortiAuthenticator —Our FortiToken and FortiAuthenticator product families allow organizations to implement multi-factor authentication to better safeguard systems, assets and data.

FortiNAC —Our FortiNAC product family enables customers to implement zero trust network access strategies by gaining visibility into devices connecting into the network, including IoT devices, in order to meet minimum required security postures and to control access.

All of the products listed above are available in multiple form factors, such as hardware, virtual machine, cloud or software-as-a-service (“SaaS”), except for FortiSwitch, FortiAP and FortiExtender, which are available as hardware appliances only.

In the fourth quarter of 2019, we acquired enSilo Limited (“ enSilo ”), a provider of endpoint detection and response products and services, and CyberSponse, Inc.

(“ CyberSponse ”), a provider of security orchestration, automation and response products and services.

We expect that the enSilo acquisition will further enhance the Fortinet Security Fabric platform and strengthen endpoint and network security solutions by providing customers with advanced endpoint security.

We expect that the CyberSponse acquisition will further extend the automation and incident response capabilities of our FortiAnalyzer, FortiSIEM and FortiGate solutions.

• FortiClient —Our FortiClient provides advanced endpoint protection with pattern-based anti-malware, behavior-based exploit protection, web-filtering and an application firewall.

FortiClient integrates with FortiSandbox to detect zero-day threats and custom malware.

FortiClient also provides secure remote access with built-in VPN, single-sign-on and two-factor authentication for added security.

• FortiToken —Our FortiToken allows organizations to implement two-factor authentication to better safeguard systems, assets and data.

With two-factor authentication, a password is used along with a security token and authentication server to provide seamless yet highly secured access between users and applications.

Authorized employees can access company resources safely using a variety of devices, ranging from laptops to mobile phones.

• FortiEDR/XDR —Our FortiEDR/XDR is an endpoint protection solution that provides both comprehensive machine-learning anti-malware execution and real-time post-infection protection.

It automatically detects and defuses potential threats in real time even on already infected hosts.

With automated EDR/XDR functions for threat hunting and incident response, FortiEDR/XDR eliminates the breach response time gap, dwell time, and alert fatigue.

Additionally, it protects systems and supports broad OS coverage workstations, servers, and virtual machines, including legacy operating and embedded systems.

In the fourth quarter of 2020, we acquired Panopta Holdings LLC (“Panopta”), a privately held SaaS company providing a platform for monitoring the health and performance of network and information technology (“IT”) infrastructure.

We expect that the integration of Panopta technology into our Fortinet Fabric Security platform through FortiMonitor will provide comprehensive network and security operations management solution for enterprises or service providers.

In the third quarter of 2020, we acquired OPAQ Networks, Inc.

(“OPAQ”), a privately held Secure Access Service Edge (“SASE”) cloud provider, to further enhance the Fortinet Security Fabric platform by helping advance our development of zero-trust network access SASE cloud solutions.

FortiGuard Security Subscription Services

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We also sell FortiGuard and FortiCare services as bundles, consolidating security services into packages that would be typical for certain types of end-customer.

Advanced Threat Protection —Our Advanced Threat Protection bundle includes application control, antivirus, IP reputation and anti-botnet security, mobile security, data sanitation, sandbox, intrusion prevention and virus outbreak protection, along with FortiCare support services.

• Unified Threat Protection —Our Unified Threat Protection bundle includes antispam, antivirus, data sanitation, sandbox, application control, intrusion prevention, virus outbreak protection and web filtering, along with FortiCare support services.

• Enterprise Protection —Our Enterprise Protection bundle includes application control, intrusion prevention, web filtering, sandbox, antivirus, mobile security, IP reputation and anti-botnet security, antispam, cloud access security broker (“CASB”), industrial control systems, security rating, virus outbreak protection and data sanitation, along with FortiCare support services.

• Advanced Threat Protection —Our Advanced Threat Protection bundle includes application control, antivirus, IP reputation and anti-botnet security, mobile security, data sanitation, sandbox, intrusion prevention and virus outbreak protection, along with FortiCare support services.

• 360 Protection —Our 360 Protection bundle includes application control, intrusion prevention, web filtering, sandbox, antivirus, mobile security, IP reputation and anti-botnet security, antispam, CASB, industrial control systems, security rating, virus outbreak protection and data sanitation, along with enhanced FortiCare support services and operational services such as SD-WAN orchestration and cloud-based management and visibility of the Fortinet Security Fabric platform.

Professional Services

We offer professional services to end-customers including technical account managers (“ TAM s”), resident engineers (“ RE s”) and professional service consultants and security architects for implementations.

TAM s and RE s are dedicated support engineers available to help identify and eliminate issues before problems arise.

We offer professional services to end-customers including technical account managers (“TAMs”), resident engineers (“REs”) and professional service consultants and security architects for implementations.

TAMs and REs are dedicated support engineers available to help identify and eliminate issues before problems arise.

Each TAM and RE acts as a single point of contact and customer advocate within Fortinet, offering a deep understanding of our customers’ businesses and security requirements.

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We have also implemented a training certification program, Network Security Expert, to help ensure an understanding of our products and services.

We typically sell our security solutions to channel partners, who in turn sell to end-customers.

We typically sell our security solutions to distributors that sell to resellers, service providers and managed security service providers (“MSSPs”), who, in turn, sell to end-customers.

At times, we also sell directly to end-customers.

Our end-customers are located in over 80 countries and include small and medium-sized businesses, large enterprises and government organizations across a wide range of industries, including telecommunications, government, financial services, retail, technology, education, manufacturing and healthcare.

Our end-customers are located in over 80 countries and include small- and medium-sized businesses, large enterprises and government organizations across a wide range of industries, including telecommunications, governments, financial services, retail, technology, education, manufacturing and healthcare.

An end-customer deployment may involve as few as one or as many as thousands of appliances and other Fortinet Security Fabric platform products, depending on the end-customer’s size and security requirements.

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During 2019, Exclusive and Ingram Micro accounted for 31% and 11% of total revenue, respectively.

During 2017, Exclusive accounted for 25% of total revenue.

During 2018, Exclusive and Ingram Micro accounted for 30% and 10% of total revenue, respectively.

Sales and Marketing

We primarily sell our products and services through a two-tier distribution model.

We sell to distributors that sell to networking security and enterprise-focused resellers and to service providers and managed security service providers (“ MSSPs ”), who, in turn, sell to our end-customers.

We sell to distributors that sell to resellers and to service providers and MSSPs, who, in turn, sell to our end-customers.

In certain cases, we sell directly to large service providers and major systems integrators.

We work with many technology distributors, including Exclusive, Ingram Micro, Synnex Corporation, Tech Data Corporation and Arrow Electronics, Inc.

We work with many technology distributors, including Exclusive, Ingram Micro, Tech Data Corporation, Synnex Corporation and Arrow Electronics, Inc.

We support our channel partners with a dedicated team of experienced channel account managers, sales professionals and sales engineers who provide business planning, joint marketing strategy, and pre-sales and operational sales support.

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To support our broadly dispersed global channel and end-customer base, we have sales professionals in over 80 countries around the world.

Our marketing strategy is focused on building our brand and driving end-customer demand for our security solutions.

Our marketing strategy is focused on building our brand, driving thought leadership with emphasis on the criticality of cybersecurity platform adoption and driving end-customer demand for our security solutions.

We use a combination of internal marketing professionals and a network of regional and global channel partners.

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In 2020, we continued to invest in sales and marketing resources, particularly in the enterprise market where we believe there is an opportunity to expand our business.

We intend to continue to make investments in our sales resources and infrastructure and marketing strategy, which are critical to support our growth.

We intend to continue to make investments in sales and marketing resources, which are critical to support our growth.

Manufacturing and Suppliers

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(“Senao”), Wistron Corporation (“Wistron”) and a number of other manufacturers.

The majority of our hardware is manufactured in Taiwan.

Approximately 85% of our hardware is manufactured in Taiwan.

We submit purchase orders to our contract manufacturers that describe the type and quantities of our products to be manufactured, the delivery date and other delivery terms.

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We believe that outsourcing our manufacturing and a substantial portion of our logistics enables us to focus resources on our core competencies.

Our proprietary SPU s, which are key to the performance of our appliances, are built by contract manufacturers including Toshiba America Electronic Components, Inc.

Our proprietary SPUs, which are key to the performance of our appliances, are built by contract manufacturers including Toshiba America Electronic Components, Inc.

(“Toshiba”) and Renesas Electronics America, Inc.

(“ Renesas ”).

These contract manufacturers use foundries in Taiwan and Japan operated by either Taiwan Semiconductor Manufacturing Company Limited (“TSMC”) or by the contract manufacturer itself.

The components included in our products are sourced from various suppliers by us or, more frequently, by our contract manufacturers.

Some of the components important to our business, including certain CPUs from Intel Corporation (“ Intel ”);

network chips from Broadcom Inc.

Some of the components important to our business, including certain CPUs from Intel Corporation (“Intel”), network chips from Broadcom Inc.

(“Broadcom”), Marvell Technology Group Ltd.

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(“Western Digital”), are available from limited or sole sources of supply.

We have no long-term contracts related to the manufacturing of our ASIC s or other components that guarantee any capacity or pricing terms.

We have no long-term contracts related to the manufacturing of our ASICs or other components that guarantee any capacity or pricing terms.

Research and Development

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We rely primarily on patent, trademark, copyright and trade secrets laws, confidentiality procedures and contractual provisions to protect our technology.

We periodically have discussions with third parties regarding licensing Fortinet’s intellectual property and have sometimes taken legal action against competitors to protect our intellectual property, and as a result third parties have paid us fees in return for licenses or covenants-not-to-sue related to Fortinet intellectual property.

We periodically have discussions with third parties regarding licensing Fortinet’s IP and have sometimes taken legal action against competitors to protect our intellectual property (“IP”), and as a result third parties have paid us fees in return for licenses or covenants-not-to-sue related to Fortinet IP.

As of December 31, 2020, we had 716 U.S.

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In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as the laws of the United States, and many foreign countries do not enforce these laws as diligently as government agencies and private parties in the United States.

Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights.

Third parties have asserted, are currently asserting and may in the future assert patent, copyright, trademark or other intellectual property rights against us, our channel partners or our end-customers.

Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other IP rights.

Third parties have asserted, are currently asserting and may in the future assert patent, copyright, trademark or other IP rights against us, our channel partners or our end-customers.

Successful claims of infringement by a third-party could prevent us from distributing certain products or performing certain services or require us to pay substantial damages (including treble damages if we are found to have willfully infringed patents or copyrights), royalties or other fees.

Even if third parties offer a license to their technology, the terms of any offered license may not be acceptable and the failure to obtain a license or the costs associated with any license could cause our business, operating results or financial condition to be materially and adversely affected.

In certain instances, we indemnify our end-customers, distributors and resellers against claims that our products infringe the intellectual property of third parties.

For information regarding seasonality in our sales, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quarterly Results of Operations—Seasonality, Cyclicality and Quarterly Revenue Trends” in Part II, Item 7 of this Annual Report on Form 10-K.

In certain instances, we indemnify our end-customers, distributors and resellers against claims that our products infringe the IP of third parties.

Government Regulation

We are subject to regulation by various federal, state, regional, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, product safety, product labeling, environmental laws, consumer protection laws, anti-bribery laws, data privacy laws, import and export controls, federal securities laws and tax laws and regulations.

Many of the laws and regulations that are or may be applicable to our business are changing or being tested in courts and could be interpreted in ways that could adversely impact our business.

In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the industry in which we operate.

We believe we are in compliance with current laws and regulations and do not expect continued compliance to have a material impact on our capital expenditures, earnings, or competitive position.

We continue to monitor existing and pending laws and regulations and while the impact of regulatory changes cannot be predicted with certainty, we do not currently expect compliance to have a material adverse effect.

For information regarding seasonality in our sales, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Unaudited Quarterly Results of Operations—Seasonality, Cyclicality and Quarterly Revenue Trends” in Part II, Item 7 of this Annual Report on Form 10-K.

The markets for our products are extremely competitive and are characterized by rapid technological change.

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• breadth of product line;

• form factor of the solution;

• other competitive differentiators.

Among others, our competitors include Barracuda Networks, Inc.

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We may not be able to compete successfully in the future, and competition may harm our business.

As of December 31, 2019 , our total headcount was 7,082 employees and contractors.

Human Capital Management

As of December 31, 2020, our total headcount was 8,238 employees, approximately 32% of which were employed in the United States and approximately 68% of which were employed outside of the United States.

We appreciate that our employees are the foundation of our innovation for the benefit of our customers and that there can be a shortage of highly skilled employees for technology companies like ours, and we believe that our success depends largely on our continued ability to attract and retain highly skilled employees with diverse backgrounds and experiences.

We offer fair, competitive compensation and benefits based on a culture of meritocracy.

Our compensation programs for our employees include base pay, opportunities for equity ownership where local statutes allow and employee benefits that promote well-being across different aspects of our employees’ lives, which may include health and welfare insurance, retirement benefits, and paid time off.

As a global company, much of our success is rooted in the diversity of our teams and our commitment to inclusion.

Our commitment to diversity and inclusion starts at the top, with a highly skilled and diverse board of directors.

As of December 31, 2020, women represented one-third of the members of our board of directors, and approximately 55% of our board of directors was from underrepresented communities as defined by California’s AB 979.

We value diversity at all levels and continue to focus on enhancing our diversity and inclusion initiatives across our entire workforce.

We are also committed to social responsibility, and our board of directors and its committees provide active oversight of our corporate social

responsibility initiatives.

Examples of our initiatives include our company matching program for employee charitable contributions and the free security training programs we offer to help with career development for our employees and the general public.

Our culture is defined by our commitment to ethics and integrity.

We reinforce our ethical “tone from the top” through clear policies including our Code of Business Conduct and Ethics, regular compliance training for our employees, quarterly meetings of our cross-functional Ethics Committee, clear messaging from our executives, enforcement of company policies and oversight by our board of directors.

In addition, our Chief Executive Officer regularly communicates the importance of Fortinet’s core values of openness, teamwork and innovation.

We are committed to providing a safe and healthy work environment for our employees.

We sponsor a global wellness program designed to enhance physical, financial and mental wellbeing for all our employees around the world.

Throughout the year, we encourage healthy behaviors through communications, educational sessions, wellness challenges and other incentives.

Early in the COVID-19 pandemic, our Chief Executive Officer committed to having no COVID-related layoffs, and, throughout the pandemic, not only have we kept that promise, we have continued hiring at a fast pace and helping support our employees and their families through this challenging time.

During the pandemic, we have taken a flexible approach to help our employees manage their work and personal responsibilities, with a focus on employee wellbeing, health and safety.

None of our U.S.

employees are represented by a labor union.

however, our employees in certain European and Latin American countries have the right to be represented by external labor organizations if they maintain up-to-date union membership.

Our employees in certain European and Latin American countries, however, have the right to be represented by external labor organizations if they maintain up-to-date union membership.

We have not experienced any work stoppages, and we consider our relations with our employees to be good.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business