F5 Networks To Buy Shape Security For $1B To Safeguard Applications

The largest acquisition in F5 Networks’ 23-year history will combine Shape Security’s fraud and abuse prevention capabilities with F5’s expertise in protecting applications across multi-cloud environments.

F5 Networks has agreed to purchase rising application security star Shape Security for $1 billion to protect customers from automated attacks, botnets, and targeted fraud.

Seattle-based F5 said the proposed acquisition will bring together its expertise in protecting applications across multi-cloud environments with Santa Clara, Calif.-based Shape Security’s fraud and abuse prevention capabilities. The deal is the largest in F5’s 23-year history, and will more than double the company’s addressable market in security.

“With Shape, we will deliver end-to-end application protection, which means revenue generating, brand-anchoring applications are protected from the point at which they are created through to the point where consumers interact with them – from code to customer,” F5 Networks President and CEO Francois Locoh-Donou said in a statement.

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F5’s stock remains unchanged at $143.69 in after-hours trading Thursday. The company expects to achieve breakeven non-GAAP earnings per share within 24 hours of closing the Shape Security acquisition, and expects the transaction will accelerate F5’s product and total revenue growth. The deal is expected to close in the first calendar quarter of 2020.

Shape Security was founded in 2011, employs more than 370 people, and has raised $183 million in six rounds of outside equity. Shape will remain located in the current Silicon Valley headquarters after the transaction closes, with co-founder and CEO Derek Smith as well as other members of Shape’s leadership team joining F5 in key management roles.

“We look forward to the opportunity to deeply integrate into F5’s platform for application delivery and security – F5 provides the optimum traffic flow insertion point for Shape’s industry-leading online fraud and abuse prevention solutions,” Smith said in a statement.

Shape’s platform is supported by cloud-based analytics and uses artificial intelligence and machine learning to defend against attacks that bypass other security and fraud controls, according to F5. The company is particularly focused on rebuffing credential stuffing attacks, F5 said, which use stolen passwords from third-party data breaches to take over other online accounts.

The company’s application platform evaluates the data flow from the user into the application, leveraging cloud-based analytics to discern good traffic from bad, according to F5. Combining Shape with F5’s location in the data flow is expected to dramatically reduce the time and resources needed for businesses to deploy online fraud and abuse protection.

“We knew from the companies we work with that applications are critical to running their business,” Locoh-Donou said in a statement. “To drive maximum business value and the best experiences for their customers, these apps need to perform flawlessly while protecting data security and user privacy.”

Some of the world’s largest banks, airlines, retailers and government agencies rely on Shape to provide sophisticated bot, fraud and abuse defense, according to F5. Joining with F5 means that Shape will be able to protect significantly more users and applications from sophisticated attacks and malicious traffic going forward, Smith said in the statement.

In the long-term, integrated F5’s products with Shape’s large-scale telemetry and analytics capabilities will significantly advance F5’s plans to offer AI-enhanced services to customers that provide better visibility, management and orchestration across their applications, Locoh-Donou said in a letter to the company’s employees.

The Shape Security deal comes just seven months after F5 closed its $670 million purchase of NGINX to help companies deliver faster, more compelling digital experiences. Locoh-Donou said in the letter that F5 has been taking deliberate and disciplined steps to become the leader in multi-cloud application services since first laying out the vision in 2017.

“We know what it takes to win,” Locoh-Donou told employees, “and make no mistake, we are playing offense.”