McAfee acquires cloud security startup Skyhigh Networks, last valued at $400M

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After spinning out as a standalone security business from Intel earlier this year, McAfee has made its first acquisition. The company has acquired Skyhigh Networks, a specialist in cloud security, the companies announced today.

The financial terms of the deal have not been disclosed, but here are a few data points: Skyhigh had raised over $106 million in funding, according to Crunchbase, most recently a Series D round a year ago, with its investors including Sequoia, Greylock and Salesforce. PitchBook, meanwhile, puts its most recent funding round at $400 million, one marker for the potential value of this deal.

The deal is a sign of the ongoing trend for consolidation in the security industry, where smaller players are coming together under larger businesses to provide more security services under one roof. This makes sense on a couple of levels.

For one, the issue of cybersecurity has become one of the most persistent in the market today, with malicious hacking a nightmare not just for businesses but individuals as more and more of our personal and not-so-personal information becoming digitised and moving to the cloud, putting it in the reach of both criminals and destructive pranksters.

In the case of Skyhigh, McAfee — whose legacy business is in endpoint security — is specifically acquiring the company for that cloud expertise. Skyhigh CEO Rajiv Gupta will head McAfee’s cloud business unit.

The other is the nature of how security services is evolving: we’re seeing a big shift to the use of data analytics and machine learning and other kinds of AI to be able to identify, track and stop cybercrime. Bringing together different services that can use and improve the bigger data pool makes all of those services stronger, potentially.

“Skyhigh Networks had the foresight five years ago to realize that cybersecurity for cloud environments could not be an impediment to, or afterthought of, cloud adoption,” Chris Young, CEO of McAfee, said in a statement. “They pioneered an entirely new product category called cloud access security broker (CASB) that analysts describe as one of the fastest growing areas of information security investments of the last five years – where Skyhigh continues to innovate and lead. Skyhigh’s leadership in cloud security, combined with McAfee’s security portfolio strength, will set the company apart in helping organizations operate freely and securely to reach their full potential.”

It’s not clear if Skyhigh was profitable, and where it stood on its funding, but this will be coupled with more investment into its business by McAfee, which was valued at $4.2 billion at the time of its spinout from Intel in April.

“Becoming part of McAfee is the ideal next step in realizing Skyhigh Networks’ vision of not simply making the cloud secure, but making it the most secure environment for business,” Gupta said in a statement. “McAfee will provide global scale to further accelerate Skyhigh’s growth, with the combined company providing leading technologies and solutions across cloud and endpoint security – categories Skyhigh and McAfee respectively helped create, and the two architectural control points for enterprise security.”

Skyhigh Networks already has produces in the areas of SaaS, PaaS and IaaS and a range of cloud-based security services around policy control both for apps in the cloud and on premises. We should expect to see more of that now being marketed to McAfee’s current roster of customers.

The deal is expected to close pending regulatory approvals and other closing conditions.

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