Akamai Buys DDoS Prevention Specialist Prolexic For $370M To Ramp Up Security Offerings For Enterprises

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The holiday season e-commerce rush is in full swing, and so are malicious hackers that will hope to profit from the increased activity online. Timely news, then, that Akamai, the specialist in optimising web site performance and content distribution, is making a big acquisition to beef up its security offerings: it is buying Prolexic, a U.S.-based provider of cloud-based security solutions for protecting data centers and enterprise IP applications from distributed denial of service (DDoS) attacks. Akamai will be paying approximately $370 million for Prolexic.

The deal is expected to close in the first half of 2014, the companies say.

Before today, Akamai already offered security solutions to those with public-facing web sites and web apps. What this acquisition will give Akamai is a solution that is more centered towards enterprise business — specifically to help protect data centers and enterprise IP applications.

“Any company doing business on the Internet faces an evolving threat landscape of attacks aimed at disrupting operations, defacing the brand, or attempting to steal sensitive data and information,” said Tom Leighton, CEO of Akamai, in a statement. “By joining forces with Prolexic, we intend to combine Akamai’s leading security and performance platform with Prolexic’s highly-regarded DDoS mitigation solutions for data center and enterprise applications protection. We believe that Prolexic’s solutions and team will help us achieve our goal of making the Internet fast, reliable, and secure.”

Later in a conference call to discuss the acquisition, Leighton noted that there are other companies out there providing similar services, such as Verisign and NeuStar, but Akamai’s belief is that “Prolexic can do this better.”

“Some carriers provide their own pipe [for secure access,]” he continued, noting other competitors in this space, “but it’s better to have a single solution that can work across different carriers and ideally before the traffic ever gets to the carrier.”

The move is the latest acquisition to come from Akamai, and appears to be the first to really build out the company’s security services offerings.

But it’s not out of left field: Akamai has long been tracking security breaches in issues for its clients, with public results produced in its regular State of the Internet reports. And in August 2012, Akamai told investors that to help increase profits and wider margins for its services, it would be making more acquisitions in security and networks companies — although this seems to be the first publicly disclosed purchase to follow through on the security part of that strategy.

The idea here is for Akamai to have an end-to-end solution that will cover not just distribution and security, but security across the range of cloud-based, or network-dependent services that a business might run over an IP network (which for many businesses is becoming most or all of their services).

“Akamai intends to provide customers with a comprehensive portfolio of security solutions designed to defend an enterprise’s Web and IP infrastructure against application-layer, network-layer and data center attacks delivered via the Internet,” the company writes, with Prolexic’s CEO Scott Hammack bolstering that idea of consolidating network services in order to provide a more efficient product:

“Today, business is defined by the availability, security and latency of Internet-facing applications, data and infrastructure,” he said in a statement. “Being able to rely on one provider for Internet performance and security greatly simplifies resolution of network availability issues and offers clients clear lines of accountability. We believe that, together, we will be able to deliver an unprecedented level of network visibility and protection.”

Prolexic, which has been around since 2003, had received nearly $52 million in venture funding, with backers including Kennet Partners, Camden Partners, Intel Capital, Trident Capital and Medina Capital. It counts among its existing clients “10 of the world’s largest banks and the leading companies in e-Commerce, SaaS, payment processing, travel/hospitality, gaming and other at-risk industries,” so the deal is not only bringing more technical expertise to Akamai, but deeper, existing inroads into a particular enterprise client base.

Release below.

Akamai to Acquire Prolexic

· Akamai aims to extend its leading Web optimization and security offerings by adding cloud-based security solutions for protecting data centers and enterprise applications

· Akamai to host related conference call today, December 2nd at 8:45 a.m. ET.

CAMBRIDGE, MA and HOLLYWOOD, FL – December 2, 2013 – Akamai Technologies, Inc. (NASDAQ: AKAM) and Prolexic Technologies, Inc. announced today that the two companies have signed a definitive agreement for Akamai to acquire Prolexic, a provider of cloud-based security solutions for protecting data centers and enterprise IP applications from distributed denial of service (DDoS) attacks.

Faced with an ever-changing threat landscape, organizations require comprehensive security solutions that address many different protection scenarios. These include securing mission‑critical Web properties and applications from attack, as well as protecting the full suite of enterprise IP applications – including email, file transfers, and VPN – across a data center.

Akamai provides leading solutions for defending Web sites and Web applications by leveraging the scale and intelligence of its global platform to protect against even the largest and most sophisticated DDoS and application-layer attacks. Prolexic combines DDoS mitigation solutions with security operations expertise for protecting data centers and enterprise IP applications.

By acquiring Prolexic, Akamai intends to provide customers with a comprehensive portfolio of security solutions designed to defend an enterprise’s Web and IP infrastructure against application-layer, network-layer and data center attacks delivered via the Internet.

“Any company doing business on the Internet faces an evolving threat landscape of attacks aimed at disrupting operations, defacing the brand, or attempting to steal sensitive data and information,” said Tom Leighton, CEO of Akamai. “By joining forces with Prolexic, we intend to combine Akamai’s leading security and performance platform with Prolexic’s highly-regarded DDoS mitigation solutions for data center and enterprise applications protection. We believe that Prolexic’s solutions and team will help us achieve our goal of making the Internet fast, reliable, and secure.”

“Today, business is defined by the availability, security and latency of Internet-facing applications, data and infrastructure,” said Scott Hammack, CEO at Prolexic. “Being able to rely on one provider for Internet performance and security greatly simplifies resolution of network availability issues and offers clients clear lines of accountability. We believe that, together, we will be able to deliver an unprecedented level of network visibility and protection.”

Under terms of the agreement, Akamai will acquire all of the outstanding equity of Prolexic in exchange for a net cash payment of approximately $370 million, after expected purchase price adjustments, plus the assumption of outstanding unvested options to purchase Prolexic stock. The closing of the transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to occur in the first half of 2014. Therefore, Akamai’s Q4 2013 existing guidance remains unchanged. The Prolexic acquisition is expected to be slightly dilutive to Akamai’s Non-GAAP net income per share in the first full year post closure in the range of $0.06 to $0.08. Once the acquisition closes, the Company will include Prolexic in its guidance going forward.