Updated with announcement and earnings:

Palo Alto Networks Inc. has acquired cybersecurity startup Cider Ltd.

Under the definitive agreement, announced today, the cybersecurity firm will acquire Cider for about $195 million, excluding the value of replacement equity awards. The acquisition is expected to close during Palo Alto Networks’ second quarter of fiscal 2023.

The announcement followed a TechCrunch report earlier in the day. It said the deal values Cider, which does business as Cider Security, at up to $300 million. The report also said Palo Alto Networks is expected to finance the transaction with up to $200 million in cash and $100 million worth of stock, though it appears it won’t be spending quite that much. Cider Security previously raised $44 million in funding from investors. 

Israel-based Cider Security provides a platform that helps software teams find and resolve vulnerabilities in application code. It can also find vulnerabilities in the tools that a software team uses to develop applications.

As part of its feature set, Cider Security’s platform provides access to more than a half-dozen third-party code scanning tools. The tools can analyze an application’s source code to find security flaws. They can identify any vulnerable open-source components that an application may contain, encryption keys managed in an insecure manner and several other types of software flaws.

Cider Security says its platform reduces the amount of manual work involved in deploying code scanning tools. To save more time for developers, the platform prioritizes the vulnerabilities surfaced by a code scanning tool based on their severity to streamline the troubleshooting process.

Cider Security’s second major focus area is helping software teams secure the tools they use to develop applications. 

Building an application is a multistep process that involves many different tasks besides writing code. Developers must test their code for potential reliability issues, package it in a software container that can be easily deployed to production and configure the infrastructure on which the container will run. Each step of the process is carried out using one or more specialized development tools.

Cider Security’s platform automatically maps out the different development tools used by a company’s developers. It then identifies potential configuration issues that may create a risk of cyberattacks. The platform can, for example, determine if a development tool contains insecure settings that may allow hackers to access an application’s code files.

The company’s technology will complement Palo Alto Networks’ Prisma Cloud platform. Prisma Cloud can detect vulnerabilities in an application’s code, as well as spot cyberattacks that attempt to target those vulnerabilities. Using Cider Security’s technology, Palo Alto Networks can help companies secure not only their application code but also the tools with which they manage the code.

Palo Alto Networks also reported its fiscal first-quarter earnings today. Revenue rose 25%, to $1.6 billion, while net income hit $20 million, or six cents a share, reversing a loss of $1.3.6 million or 35 cents a share. Profit before certain costs rose 56% from a year ago, to $266.4 million, or 83 cents a share.

“Our growth in Q1 was driven by customers continuing to increase their commitments to our security platforms as they are able to choose our best-of-breed capability and simplify their security architecture,” said Palo Alto Chief Executive Nikesh Arora. “We are focused on expanding the breadth of our offerings and our pace of innovation to continue to drive share gains in the cybersecurity market.”

Palo Alto’s stock rose almost 5% in after-hours trading after falling about 1.6% in the regular session. That may have been driven by positive guidance. For its second quarter, it’s expecting adjusted earnings of 76 to 78 cents a share on revenue of $1.63 billion to $1.66 billion, up between 24% and 26%.

For the full fiscal 2023, it raised guidance to revenue between $6.85 billion and $6.91 billion, up 25% to 26%, and adjusted earnings of $3.37 to $3.44 a share.

The purchase of Cider Security marks the latest in a series of nine-figure startup acquisitions the company has made over recent years. Similarly to Cider Security, many of those startups developed tools that help companies fix vulnerabilities in software code and ensure internal systems’ configuration settings meet cybersecurity requirements. Several of the products that Palo Alto Networks has acquired in recent years are now part of its Prisma Cloud platform.

With reporting from Robert Hof

Photo: Palo Alto Networks