$Palo Alto Networks (PANW.US)$Ongoing$IBM Corp (IBM.US)$The acquisition of cloud security software assets, as part of a broader partnership between the two parties, will allow the cybersecurity company to reach more consulting firms and a larger customer base.
In a joint press release, the two companies said Palo Alto will acquire IBM's QRadar cloud software for an unknown amount and migrate existing customers to IBM's secure platform Cortex Xsiam. Palo Alto CEO Nikesh Arora said the move usually takes one to three months. Additionally, IBM will train more than 1,000 of its consulting employees on Palo Alto products.
As enterprises prepare for numerous attacks caused by artificial intelligence, the consolidation of the security software industry continues to increase. In March of this year, Cisco (CSCO.US) acquired the networking company Splunk for 28 billion dollars, winning the leading security information and event management (SIEM) software provider in one fell swoop. This was the largest deal in Cisco's history.
Earlier on Wednesday, two other SIEM marketplaces companies, ExaBeam, and LogRhythm of private equity firm Thoma Bravo also announced plans to merge.
Arora said his company needs to be better prepared to compete with Splunk.
Palo Alto and IBM have been working closely together for several months, and Arora said he has been discussing how to advance their partnership with IBM CEO Arvind Krishna, but they both sell SIEM software.
Krishna said the Splunk deal did not prompt IBM to reach an agreement with Palo Alto. “I don't think we're really competing with most products in the Cisco portfolio,” Krishna said.
Last December, IBM said its consulting team would provide customers with Palo Alto's competitor Cortex Xsiam software. Now, IBM will use Cortex Xsiam and Palo Alto's Prisma Sase 3.0 product package. In addition to using Google's model, Palo Alto will incorporate IBM's WatsonX large-scale language model into Cortex Xsiam.
The SIEM category has existed for over 20 years, but Palo Alto only launched Cortex Xsiam two years ago. The platform is rapidly gaining popularity, with bookings of over $90 million in the most recent quarter. Arora said the company has been snatching market share from “everyone.”
For IBM, a stronger lineup of modern consulting security tools could help the company achieve its stated goal of achieving medium single-digit revenue growth by 2024. In the first quarter, the company's revenue increased by 3%, with the consulting division growing by 2%.
Palo Alto is growing much faster than IBM. The company's revenue increased 19% in the last quarter. The company will announce its latest quarterly results on Monday.
Last year, Palo Alto's market capitalization more than doubled, and its stock price has increased by 6% so far this year, bringing the company's market value to over $100 billion. IBM's stock price has risen nearly 5% this year, and its current market capitalization is $154 billion.
The two companies said the deal should be completed by the end of September, subject to regulatory approval and other conditions.
“I expect we will grow a significant consulting business on Palo Alto's products, just like I did on Azure and AWS,” Krishna said in an interview. According to reports, IBM helps organizations run their software on Amazon (AMZN.US) and Microsoft (MSFT.US) public clouds. He said he hopes to quickly generate hundreds of millions of dollars in new consulting revenue.
Krishna said IBM will continue to sell its QRadar software for local data centers.
Meanwhile, Krishna said IBM would recommend that its customers consider switching to Palo Alto's Cortex Xsiam.