Cybersecurity company Palo Alto Networks (PANW) acquired Tuesday Demisto for $ 560 million in cash and shares. The medium-sized deal comes amid concerns that its new CEO may embark on a wave of acquisitions, which has put pressure on Palo Alto's stock.
The Palo Alto stock rose 1.4% to close at 229.90% stock market today. The acquisition of Demisto expands Palo Alto's capabilities into so-called security and event information management tools, or SIEM, in relation to Splunk (SPLK) and others. With 150 employees, Demisto has offices in Tel Aviv, Israel, and Cupertino, California.
SIEM tools collect computer event logs and other data for trend analysis. Demisto uses artificial intelligence to automate response capabilities if SIEM tools detect a threat. Analysts believe that software markets for SIEM and the orchestration of security, automation and response, or SOAR, are likely to converge.
"We believe that Demisto's technology and service offerings are promising, but Palo Alto is paying a lot of money," said Keith Bachman, an analyst at BMO Capital Markets, in a report to his clients.
Palo Alto Target Splunk, FireEye
John DiFucci, an analyst at Jefferies, is also cautious.
"One of Demisto's major strengths is its ability to integrate with a variety of security product line vendors and to be so neutral," DiFucci said in its note to customers. "Demisto now part of Palo Alto, we are questioning this neutrality in the future."
With the acquisition of Demisto, Palo Alto gains the capabilities of SOAR over Splunk, FireEye (Feye) IBM(IBM) Resiliant, Siemplify startup and others.
The gains in Palo Alto are due on February 26
Palo Alto is mainly competitive in the "firewall" network security market. However, it has been built a broader cybersecurity platform.
CEO Nikesh Arora, former senior officer of the Alphabet unit Google (GOOGL), told analysts that he did not plan to conclude a major contract that would transform the company. Financial results for the second quarter of Palo Alto are expected on February 26.
Joel Fishbein, an analyst at BTIG Research, said in a report that Palo Alto had about $ 3 billion in cash on the balance sheet. "We are expecting more M & A from general manager Arora and his team to accelerate the proliferation of its framework of application (platform)," he said in a report.
The Palo Alto stock formed a five-month sectional chart pattern. Palo Alto's shares are trading at around 5% below a technical purchase point of 239.60.
YOU COULD ALSO LOVE:
What's a day of follow-up?
Reading charts for beginners: What does a stock chart contain? Why use graphics?
New strategy of options limits risks around profits
What is an out of stock? It's a map "get out of jail"
How to invest in growth stocks: read this column daily
Stock IBD of the day