This acquisition could be considered a surprise, but when companies can find value and the acquisition makes sense. Consolidation happens even during pandemic. Yesterday, CloudGenix agreed to be acquired by Palo alto networks for nearly $500 million. Palo Alto is trying to gain ground against the larger networking providers and by gaining access to the CloudGenex customer base of more than 800, they’re making up ground quickly.
The timing of this acquisition is interesting but seeing a company like Palo Alto accelerate needed consolidation in this space makes sense. Additionally, the acquisition will extent Palo Alto’s SD-WAN capabilities by implementing the superior technology used in the CloudGenix platform. Most notably, this will allow Palo Alto to lower their latency by leveraging the Google Global network that is incorporated into the CloudGenix architecture. This will have an incredible impact on quality of service and enrich user experience.
The only thing that will need more clarification is how Palo will handle the Zscaler conundrum. Many of the current CloudGenix customer base leverages Zscaler for securing cloud applications through a previously established partnership. Short term we suspect it will be business as usual, but long term there will likely be service changes, but this will be interesting to watch.
Keep an eye out for additional consolidation in this space. As money markets tighten, we wouldn’t be surprised to see Venture Capital leave this industry. We believe that these firms may be satisfied breaking even, so organizations with strong balance sheets may gobble up additional smaller providers as the year goes on.