SUNNYVALE, Calif. - Fortinet (NASDAQ:FTNT), a global leader in broad, integrated, and automated cybersecurity solutions, today announced its definitive agreement to acquire Lacework, a data-driven security company specializing in AI-powered cloud security. The acquisition aims to enhance Fortinet's Security Fabric and propel its Unified SASE (Secure Access Service Edge) expansion.
Lacework is known for its AI-powered cloud security platform that provides comprehensive security from code to cloud, integrating critical CNAPP (Cloud-Native Application Protection Platform) services. Trusted by nearly 1,000 customers, Lacework's technology suite includes patented AI and machine learning, agent and agentless data collection architectures, a proprietary data lake, and robust code security offerings.
Fortinet, with more patents than its three closest competitors combined and over 100 mentions in industry analyst reports, including eight Gartner (NYSE:IT) Magic Quadrant recognitions, plans to integrate Lacework’s CNAPP solution into its Unified SASE offering. This integration is expected to form one of the most comprehensive, full-stack AI-driven cloud security platforms available from a single vendor, addressing the complexities of cloud-native infrastructure security.
Ken Xie, Founder, Chairman of the Board, and CEO at Fortinet, emphasized the shared commitment to innovation and integration between the two companies. He stated that this acquisition underscores Fortinet's dedication to providing consistent security across various environments. Jay Parikh, CEO at Lacework, also highlighted the potential for deeper customer engagement through the integration with Fortinet’s platform.
The financial details of the transaction, expected to close in the second half of 2024, have not been disclosed. The acquisition is subject to regulatory approvals and customary closing conditions. Fortinet has committed to a seamless transition for Lacework customers and partners. Lacework customers are anticipated to benefit from Fortinet's global reach, resources, and threat intelligence while continuing to utilize their existing security infrastructure investments.
Goldman Sachs (NYSE:GS) & Co. LLC served as the exclusive financial advisor to Lacework, with Cooley LLP providing legal counsel. Fenwick & West LLP acted as legal counsel to Fortinet. This strategic move aligns with Fortinet’s growth strategy in the Unified SASE market and reaffirms its commitment to innovation and integration in cybersecurity solutions.
The information is based on a press release statement.
In other recent news, Fortinet's shares have seen a series of price target adjustments from various analyst firms following mixed first-quarter financial results. The cybersecurity company's strong revenue and margins were offset by a modest shortfall in billings and a lower billings forecast for the second quarter.
Analyst firms Piper Sandler, BMO (TSX:BMO) Capital Markets, Truist Securities, Mizuho Securities, and UBS all lowered their price targets for Fortinet, though they maintained neutral to positive ratings on the stock.
Despite these adjustments, Fortinet's Secure Access Service Edge (SASE) offering is gaining traction, as evidenced by a notable increase in its mix to 24% and a year-over-year pipeline growth of 45%. This growth includes a significant 150% surge in the Secure Service Edge (SSE (LON:SSE)) pipeline. The company's strategic emphasis on expanding beyond secure networking is reflected in these figures.
However, Fortinet's billings performance has been underwhelming due to a weaker market in Europe and challenging year-over-year comparisons. The company's product revenue has faced hurdles as the firewall market begins to stabilize. Despite these challenges, Fortinet management has reiterated the full-year billings guidance, highlighting the importance of a potential recovery in billings during the second half of the year.
InvestingPro Insights
In light of Fortinet's recent announcement to acquire Lacework, investors and industry observers are closely monitoring Fortinet's financial health and market position. According to InvestingPro, Fortinet displays robust financial metrics that could support its strategic growth initiatives. The company's market capitalization stands at a solid 45.62 billion USD, reflecting investor confidence and the company's scale in the cybersecurity space.
One of the key InvestingPro Tips for Fortinet is its impressive gross profit margin, which has reached 77.13% over the last twelve months as of Q1 2024. This margin indicates a strong ability to control costs and deliver services efficiently, which is crucial as the company aims to integrate Lacework's technology into its offerings. Additionally, Fortinet's management has been actively buying back shares, signaling confidence in the company's future and a commitment to delivering shareholder value.
Fortinet's P/E ratio, a measure of its earnings relative to its share price, is currently at 38.5, suggesting that investors are willing to pay a premium for its earnings potential. Moreover, the company has been profitable over the last twelve months, which aligns with analysts' predictions that Fortinet will remain profitable this year. This profitability, combined with the fact that Fortinet holds more cash than debt on its balance sheet, positions the company on a stable financial footing as it moves forward with the Lacework acquisition.
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