Fastly, a provider of edge content delivery services, announced the acquisition of Signal Sciences, a provider of security services, for a total price of $775M in cash and stock. The deal is expected to close later in 2020.
Fastly has seen torrid gains in its stock value in 2020 and decided to parlay that into a significant acquisition – the tender consists of $200M in cash and $575M in stock. The company’s stock price has vaulted up over 330% this year and is now trading in the $94 per share range and is knocking on the door of $100 per share as some Wall Street analysts have upped their target prices.
“Signal Sciences’ technology will round out our forthcoming security offering, Secure@Edge,” said Fastly CEO Joshua Bixby on a call announcing the deal. Where Fastly did have a web application firewall offering based on open source technology, Signal Sciences’ technology has additional detection capabilities needed to keep abreast of constantly evolving attacks.
Bixby noted that some of Signal Sciences’ value lies in features such as the ability to do bot management, account takeover protection, request rate limiting, DPI protection as well as its web application firewall.
“Our company’s vision has always been to provide the primitives, and products our customers need to solve their business problems,” Bixby said. “Even as our security offering expands, we will continue to support our customers when they want to use a third-party security provider, by making integration, easy and straightforward,” he added.
In terms of integrating the new company, Fastly said that its own application architecture takes advantage of its edge computing platform in a way that will make integration of Signal Sciences easier.
In terms of business benefits, Signal Sciences will add “incremental” revenue and help expand Fastly’s gross margins (Signal posted annual recurring revenue of $28M in 2Q 2020). In terms of customer overlap, Fastly said it is gaining 42 net new customers in the deal.
The additional product and revenues will be crucial to Fastly’s continued expansion in 2020 and beyond. Security services are the fastest growing segment of the CDN market, which as a whole is expected to top $5.7B in 2020, according to Edge Research Group.
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