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Okta CEO Todd McKinnon on Friday defended his firm’s decision to acquire Auth0, calling the rival company a complementary asset to its identity and access management business.
Okta shares are down 10% since announcing the all-stock $ 6.5 billion deal after Wednesday’s close. Revenue is over a fifth of Okta’s market cap and a valuation premium of $ 1.92 billion Auth0 received after a fundraising round last summer.
“It’s a business that’s on its way to going public and, as you know, government procurement values public companies in a way,” McKinnon told CNBC’s Jim Cramer.
He appeared on “Mad Money” alongside Eugenio Pace, the managing director of Auth0.
“If you look at how we assess it, it’s a growth factor for us,” McKinnon added. “We actually paid a multiple on income that was slightly lower than ours, but in the same direction.”
Auth0 is an identity management platform for application developers based in Bellevue, Washington. It competes with Okta, a $ 28 billion cybersecurity firm based in San Francisco. Okta provides security tools to authenticate users, such as password permissions, access to online networks.
Auth0 will function as an independent arm within Okta when the deal closes at the end of July.
Asked about the need to acquire another identity provider when Okta already has its own offerings, McKinnon said the merger would give his company a better way to manage customer identity and access management.
He explained that the $ 30 billion workforce identity market represents 75% of Okta’s revenue, while the $ 25 billion customer identity market represents 25% of Okta’s revenue. income. Okta focuses more on preconfigured and preconfigured solutions, while Auth0 focuses more on developers of specially designed applications, he added.
Auth0 is “a product that is much more flexible and extensible and does exactly what the developer needs to do which is why the two solutions together are so compelling,” McKinnon said. “They give customers great choice, great flexibility and great value for money and really bolster that $ 25 billion. [total addressable market]. “
Okta shares fell 4.54% to $ 215.96 on Friday. The company reported fourth-quarter revenue of $ 234.7 million on Wednesday, a 40% increase from a year ago. It showed a net loss of $ 75.8 million, down from a loss of $ 50.5 million in the last year’s quarter.
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