UPDATED 14:30 EDT / MARCH 31 2020

palo-alto-networks CLOUD

Continuing acquisition spree, Palo Alto Networks buys CloudGenix for $420M

Palo Alto Networks Inc. is shelling out $420 million to buy CloudGenix Inc., a maker of network management products that help enterprises provide faster access to business applications for employees.

The deal, announced today, is on track to close in Palo Alto Networks’ fourth fiscal quarter ending July 31. CloudGenix co-founders Kumar Ramachandran, Mani Ramasamy and Venkataraman Anand are coming aboard as part of the deal.

Palo Alto Networks, a major provider of cybersecurity software for the enterprise, has been on an acquisition tear in recent quarters. It most recently bought protection provider Aporeto Inc. for $150 million in November and spent a total of over $1 billion on breach prevention startups during 2019. CloudGenix’s main focus is not security, but it does provide some network protection features and its technology should advance Palo Alto Networks’ product roadmap at the strategic level. 

CloudGenix’s flagship product is an SD-WAN, or software-defined wide area network, platform called AppFabric that optimizes data traffic between a company’s employees and the business applications they use for work. The startup claims it can reduce WAN costs by up to 70%. It also helps speed up connections by allowing administrators to prioritize the traffic of important applications, such as videoconferencing services.

AppFabric’s network protection features take the form of controls that enable information technology teams to set restrictions on application access. Administrators can, for instance, require that workers use a virtual private network tool when they log into sensitive applications.

Palo Alto Networks plans to integrate CloudGenix’s technology with its Prisma Access product. Prisma Access is a network security platform that blocks malicious websites and detects traffic generated by malware, and it can limit employee access to sensitive records in order to prevent data leaks.

By integrating its traffic protection features with AppFabric’s traffic management features, Palo Alto Networks should be able to offer a more comprehensive and, by extension, more competitive solution to its customers. One-stop-shop platforms have a lot of appeal to enterprises because they spare IT departments the trouble of manually cobbling together multiple point solutions. That’s also why Palo Alto Networks stitched together many of the products it obtained through last year’s acquisition spree in the recently introduced Prisma Cloud platform

“Upon the close of the transaction, the combined platform will provide customers with a complete SASE [secure access service edge] offering that is best-in-class, easy to deploy, cloud-managed, and delivered as a service,” Palo Alto Networks Chief Executive Nikesh Arora said in a statement. 

The deal also serves to give the company a foothold in a fast-growing segment of the networking market. Last year, International Data Corp. released a forecast estimating that spending on SD-WAN solutions will grow at a 30.8% compound annual growth rate through 2023 to reach $5.25 billion annually.

CloudGenix raised more than $90 million in funding prior to the acquisition. The $420 million Palo Alto Networks is paying represents a respectable exit for the startup’s investors, which included Bain Capital Ventures, Charles River Ventures, Mayfield Fund and Intel Corp. among others. 

Photo: Palo Alto Networks

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