UPDATED 19:56 EDT / NOVEMBER 25 2019

SECURITY

Palo Alto Networks acquires cloud security startup Aporeto for $150M

Palo Alto Networks Inc. has entered an agreement to acquire cloud security startup Aporeto Inc. for $150 million in an all-cash deal.

Founded in 2016, Aporeto offers a zero-trust cloud security platform that auto-generates identity by analyzing workload metadata from any available system and user identity data. Zero trust is an increasingly popular security model that is based on the principle of maintaining strict access controls and not trusting any one by default, even those already on a network.

Aporeto delivers zero trust through a whitelist-based approach to security. The company’s solution works by facilitating end-to-end authentication, authorization and encryption for all application components, including virtual machines, containers and microservices, Amir Sharif, co-founder of Aporeto, told SiliconANGLE in 2017.

“What this does is it allows security to follow the application anywhere, regardless of network architecture, including traversing the WAN into disparate clouds,” Sharif said. “Because Aporeto’s security is embedded in the infrastructure, it makes security invisible and unobtrusive to the developer. This allows developers to move fast and focus on core functionality instead of tedious work on meeting security requirements.”

Aporeto comes to Palo Alto Networks with a customer list that includes Comcast Ventures, Bart, British Columbia, Informatica LLC and Exact Transactions Ltd.

Aporeto had raised $34.5 million in venture capital funding prior to acquisition. Investors include Norwest Venture Partners, Data Collective, Telia Ventures, National Grid Partners, Comcast Ventures and Wing Venture Capital.

For Palo Alto Networks, the acquisition will be used to enhance and strengthen its own Prisma Cloud capabilities. The deal is expected to close in the company’s fiscal second quarter.

The acquisition is Palo Alto Network’s seventh in less than two years. Previous acquisitions include Zingbox Inc. for $475 million Sept. 5, Twistlock Ltd. ($410 million) and PureSec Ltd. May 29, Demisto Inc. for $560 million Feb. 19, RedLock Inc. for $173 in Oct 2018, Secdo Ltd. for $100 in April 2018 and Evident.io for $300 million in March 2018.

The announcement was made the same day Palo Alto Networks delivered financial results for its fiscal first-quarter ended Oct. 31.

Palo Alto Networks reported revenue of $771.9 million in the quarter, up 18% from the same quarter last year. Net loss for the quarter came in at $59.6 million, or 62 cent per diluted share, compared with a loss of $38.3 million, or 41 cents per share, a year ago. Profit before costs such as stock compensation fell to $104.8 million, or $1.05 per diluted share, from $115.4 million a year ago.

Palo Alto Networks is predicting revenue of between $838 million and $848 million in its second quarter on total billings of $985 million to $1 billion. Adjusted profit is predicted to be $1.11 to $1.13 a share, incorporating net expenses of the Aporeto acquisition.

For the full fiscal year 2020, the company estimated revenue of $3.44 billion to $3.48 billion, billings of $4.105 billion to $4.165 billion and an adjusted profit of $4.90 to $5 per share.

Although the earnings beat market expectations, investors were disappointed with guidance. Analysts had been predicting $1.30 per share for the company’s second quarter, well above the $1.13 to $1.15 estimated by the company. The full-year prediction also fell below analysts’ consensus predictions of $5.07 a share.

Shares in Palo Alto Networks had plunged 8.5% in after-hours trading, to $229.10, as of 7:30 p.m. EST.

Image: Aporeto/YouTube

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