Palo Alto Ticks Twistlock On Buyout Checklist, Aids Portfolio

Palo Alto Networks (NYSE:PANW) recently announced the completion of its buyout of Twistlock. The company bought the same for a cash consideration of $410 million.

Twistlock co-founders, Ben Bernstein and Dima Stopel, will join Palo Alto Networks following the move.

The acquired entity will continue to be available as a separate product and be also incorporated into Prisma Public Cloud.

What it Means for Palo Alto

The buyout will extend the company’s comprehensive cloud security strategy, Prisma, and enhance its capabilities to provide end-to-end protection for modern applications. This, in turn, will safeguard clients’ journey to the cloud in a much better fashion.

With the acquisition, Palo Alto aims to add container security capabilities to its portfolio. Containers are quickly gaining traction as a preferred software development infrastructure option.

The company believes that with the growing number of organizations shifting their workloads to the cloud, the necessity of cloud-native technologies, such as containers and serverless infrastructure to expedite development, testing and deployment of modern applications and services has increased.

Per Gartner, more than 75% of global organizations will be running containerized applications in production by 2022, which is significantly higher than today’s adoption rates.

A spurt in containerized applications, running both on-premises and in the cloud, is boosting the container security market. Per Arcluster, the container security market is estimated to touch $2.25 billion by 2023.

Moreover, the buyout will augment Palo Alto’s reach to more than 300 Twistlock customers including an excess of 75 Fortune 100 companies.

Palo Alto Leads the Takeover Trend in Security

Another point worth mentioning is the rising consolidation in the security market. Although this leads to fewer competitors for Palo Alto, incumbents like Cisco (NASDAQ:CSCO) , FireEye (NASDAQ:FEYE) and VMware (NYSE:VMW) are honing their competitive skills by pursuing respective acquisitions.

Cisco’s impending integration of Industrial IoT security company Sentryo and FireEye’s acquisition of the cybersecurity vendor Verodin in May this year bears testimony to the bout of takeovers taking place within the security space in recent months.

Last December, VMware acquired Heptio in a bid to better secure the client companies’ journey to the cloud.

However, Palo Alto has been especially active in this area. Since 2017, the company has spent nearly $1 billion on acquiring several small entities, specialized in the various aspects of security. This year, it has already purchased three firms including Demisto and PureSec. Management is optimistic about this inorganic growth strategy. The consolidation of Redlock has raked it significant revenues, since it was closed last October 2018.

Palo Alto’s belief that its addressable market will be worth $24 billion by 2020 compared with $19 billion in 2017 is encouraging enough to move it forward in the cybersecurity market. The company’s efforts are leading to consistent expansion of its customer base and revenue growth.

Palo Alto currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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