We all know that cybersecurity is a hot business segment to be involved in right now.
And if you're involved in it, your company probably wants to become more involved in it.
Speaking of that, the Motley Fool stock advisor just weighed in on VMware's $4.8 billion spending spree in cybersecurity and app development. Analysts there believe the deal makes more than dollars, it makes sense:
Possibly because it sees app development and security as two sides to the same problem, VMware went shopping to solve both tasks simultaneously. It landed on longtime partner and software developer Pivotal Software (NYSE: PVTL) and cloud-based endpoint security outfit Carbon Black (NASDAQ: CBLK), carrying price tags of $2.7 billion and $2.1 billion, respectively. Those are hefty price tags, but not unreasonable. That's about half a year's worth of revenue and just over a year's worth of free cash flow for VMware.
Speaking to the reasons for buying Pivotal and Carbon Black, CEO Patrick Gelsinger introduced his second-quarter commentary this way:
As digital transformation accelerates in enterprises, we see three secular trends becoming stronger. First, multi-cloud is the new model for enterprise IT. Second, digital transformation is driving accelerated pace of cloud-native app development. Last but not least, as businesses move applications to the cloud and access it over distributed networks from a diversity of endpoints, security has become a significant challenge and priority.
[MORE: Read the Motley Fool's take, over at Yahoo Finance.]
The Motley Fool makes note of the fact that VMware has also purchased a number of smaller companies recently, as well, in areas like AI and network monitoring.
What we're seeing in the space mirrors what we've been hearing about at our SecureWorld regional conferences, especially the last couple of years.
This merging or acquiring of cybersecurity specialties to increase overall security offerings was also the stated rationale when Proofpoint acquired Wombat Security in 2018.
Gary Steele, Proofpoint CEO, said at the time:
"The acquisition of Wombat gives us greater ability to help protect our customers from today’s people-centric cyberattacks, as cybercriminals look for new ways to exploit the human factor."
With cybersecurity deals constantly in the works, analysts expect to see more acquisitions like these going forward.
The only question is which significant players will do this next.