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Proving again that bigger is better in the fight against global cyber-attacks, another sizable cyber deal was inked late Monday.
Santa Clara, Calif.-headquartered Palo Alto Networks Inc. (NYSE: PANW) acquired Silicon Valley startup Morta Security, described as "operating in stealth mode since 2012." Financial terms of the transaction were not disclosed.
PANW stock rose 3.7% Tuesday on the news.
Morta's specialization in protecting national infrastructure will strategically compliment Palo Alto's core firewall products used by some 2,400 customers. Moreover, it will position Palo Alto Networks to reach a much broader clientele.
"The company's technology development aligns well with our highly integrated, automated and scalable platform approach and their contributions will translate into additive threat detection and prevention benefits for our customers," Palo Alto Chief Executive Officer Mark McLaughlin said in a statement.
The deal underscores recent consolidation in the industry.
Just last week, global security firm FireEye Inc. (Nasdaq: FEYE) bought privately held information security company Mandiant Coro. in a $1.05 billion cash and stock deal – one of the industry's biggest to date.
"One of the next big steps is further automating the process of finding bad things on the network and remediating it," Palo Alto founder Nir Zuk added. "Today that process is very manual – you call Mandiant or one of their competitors – but we believe it has to be automated."
Morta, founded in 2012 and led by executives and engineers from the National Security Agency (NSA), has kept its technology secret. But it's no secret that Morta has attracted interest from several venture capital firms, receiving more than $1 million in funding.
The stealth start-up fights the most sophisticated security threats known within the security industry as "advanced persistent threats." Morta is capable of detecting and thwarting highly sensitive breaches against government agencies as well as violations against businesses that traditional antivirus products typically miss.
"We believe the antivirus market is hopelessly behind in being able to address the most acute problems," Zuk continued. "This is not where the action is and that is not where the majority of the money is going to be."
Cybersecurity: What the World Needs Now…
The PANW deal comes on the heels of a number of high-profile security breaches over the last few weeks.
Retail giant Target Corp. (NYSE: TGT) recently reported sensitive customer data was stolen via a cyber-attack. Skype's social media channels were also just hacked. And, 4.6 million users of the photo-sharing app Snapchat found their personal information was recently posted online after a hack-attack.
Partnered, Morta and Palo Alto will have a distinct edge over other cybersecurity firms. They target an attack at the detection level, unlike others who clean up after a breach.
Investors recognized the potential and sent Palo Alto shares soaring following news of the acquisition. Since its IPO debut in July 2012, PANW stock has climbed more than 22%.
According to research firm CB Insights, in the past 12 months 80 cybersecurity firms have exited via mergers and acquisitions or initial public offering. Additionally, venture capital funding for cybersecurity continues to climb. During the first half of 2013, cybersecurity and big data firms secured $2 billion in funding, an 81% increase of the first half of 2012.
The red hot sector is perfectly poised for deals this year. Find the industry names to watch here.
Palo Alto Buy Cyber Security Startup Founded By Former NSA Engineers, Morta
- The New York Times:
Palo Alto Networks Acquires Start-Up Morta Security
- FOX Business News:
Palo Alto Networks Buys Stealthy Cyber Startup Led by Former NSA Engineers