Convergence: Akamai, Palo Alto Networks and Fortinet

On February 3, 2014, Palo Alto Network’s stock (PANW) closed at $57.71. Approximately one year later, their stock closed at $126.90, valuing PANW at $10.1B. That is a significant accomplishment. PANW is twice the value of Fortinet, twice the value of FireEye, and in the same ball bark as Akamai. What does PANW, Fortinet and Akamai have in common? They’re in the cloud security business, and those segments are converging, and features sets are now overlapping. The pure-play security segment is one of the best sectors in technology, especially when one correlates annual revenue to market cap, as illustrated below. That is the reason why CDNs are investing heavily in developing their security feature set.

Company Oct-2014 July-2014 Apr 2014 Jan 2014 Mkt Cap
Akamai $498M $476M $453M $435M $10.3B
Palo Alto $192M $178M $150M $141M $10.1B
Fortinet $193M $184M $168M $177M $4.9B

Security Feature Set Comparisons

The diagram below illustrates and compares the features between PANW, Fortinet and the Cyber Security CDN. PANW has made the smart decision to offer its products on a virtualized basis, because low cost high performance bare metal hardware is a more economical alternative, than highly priced proprietary hardware solutions. Incapsula, Distil Networks and Zenedge have decided to cross from the last mile security tier, into other tiers. Its likely that one day Cyber Security CDNs will develop feature sets that enable them to compete head to head with PANW. With $1.6B+ in cash, Akamai is in the best position to do so.

Cyber Security Convergence

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