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Palo Alto Networks to Acquire IBM’s Cloud Security Assets, Boosting Cybersecurity Capabilities and Market Reach

Palo Alto Networks is acquiring cloud security software assets from IBM, enhancing their collaboration by expanding Palo Alto's consultant network and customer base.

According to a joint statement, Palo Alto Networks will purchase IBM’s QRadar cloud software for an unspecified amount, transitioning current users to its Cortex Xsiam platform, a process that Palo Alto's CEO, Nikesh Arora, estimates will take between one to three months. Additionally, IBM plans to train over 1,000 consulting staff on Palo Alto’s products.

This acquisition is part of a wider trend of consolidation within the cybersecurity sector, driven by an increasing number of threats influenced by advancements in artificial intelligence. For instance, in March, Cisco completed its largest acquisition by purchasing Splunk for $28 billion, a leader in security information and event management (SIEM) software. Also, earlier on Wednesday, Exabeam and Thoma Bravo’s LogRhythm announced a merger.

Arora emphasized the competitive necessity of the acquisition, particularly in relation to Splunk. He described the cybersecurity landscape as a "hotbed of activity."

The partnership between Palo Alto and IBM has deepened over recent months, following discussions between Arora and IBM’s CEO, Arvind Krishna, on enhancing their collaboration, despite both companies previously selling competing SIEM products. Krishna indicated that Cisco’s acquisition of Splunk was not a catalyst for IBM's deal with Palo Alto.

IBM, which will continue offering its QRadar software for on-premises use, will now also promote Palo Alto's Cortex Xsiam and Prisma Sase 3.0 product bundle. Additionally, Palo Alto will integrate IBM’s Watsonx large language models into its Cortex Xsiam software, which also utilizes models from Google.

Introduced just two years ago, Cortex Xsiam has rapidly gained market traction, with bookings exceeding $90 million last quarter. Arora noted that his company is capturing market share from competitors.

The strategic collaboration is anticipated to bolster IBM's consulting capabilities, aligning with its goal to achieve mid-single-digit revenue growth in 2024. For the first quarter, IBM reported a revenue increase of 3%, with consulting up by 2%.

Palo Alto, growing significantly faster than IBM, reported a 19% revenue increase in its January quarter and is scheduled to announce its latest quarterly results on Monday. The company’s market value more than doubled last year, with a year-to-date stock increase of 6%, pushing its market cap beyond $100 billion. IBM has also seen a stock rise of about 5% this year, now valued at $154 billion.

The deal is expected to close by the end of September, pending regulatory approval and other conditions. Krishna expressed confidence in significantly growing IBM's consulting business through Palo Alto's products, similar to its success with Azure and AWS, and anticipates quickly generating substantial new consulting revenues.


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