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Akamai Acquires KryptCo, Enhances Cloud Security Portfolio

Zacks Equity Research

Akamai Technologies, Inc. AKAM recently acquired KryptCo, a security startup that builds mobile-based authenticationtechnology, in order to strengthen presence in the zero trust ecosystem. However, the financial terms of the deal were kept under wraps.

Akamai integrated Enterprise Application Access (EAA) with KryptCo’s Multi-Factor Authentication (MFA) solution. This will enhance security and improve functionality of Akamai’s user interface.

KryptCo technology creates an authenticated and encrypted architecture that aid enterprises to defend against breaches through end-to-end and effective cloud-based Trusted Access product suite.

With the joint Akamai-KryptCo solution, organizations can begin adopting a zero trust security model. Moreover, organizations can further enhance security features and mitigate phishing incidents on devices. This buyout will aid Akamai to deliver on its commitment of safeguarding customer data while focusing on people-centric secure enterprise IT approach.

What is Zero Trust Security?

In the Zero Trust approach to cybersecurity, the network and the vulnerabilities are assumed to be constantly evolving and indiscernible. This means that perimeter security is no longer enough to protect the organization. A core tenet of Zero Trust is to keep a lookout for malicious activities in all internal and external traffic, and identify the areas of improvement. Summing up, the model follows one rule — “Never Trust, Always Verify.”

Synergies from Buyouts Hold Promise

Akamai's Enterprise Application Access aids IT and security teams to shift to Zero Trust security architecture. Consequently, the latest acquisition will empower the new cloud businesses with a secure single sign-on and unified access. With the acquisition, the company expects to enhance its security solutions portfolio amid growing data traffic.

Moreover, with this acquisition, Akamai’s customers will be able to experience greater flexibility in operations, enhanced multi-level security, increased awareness and greater administrative control. This additional level of protection will aid the company gain the trust of users, consequently increasing adoption of its products and ultimately boosting the top line.

Cloud Security Solutions Gaining Traction

Robust adoption of Akamai’s security solutions has bolstered the top line. The company has returned 46.4% on a year-to-date basis, outperforming the industry's rally of 3.9%.

 

Cloud Security solutions segment revenues were up 32% year over year to $204.8 million comprising 29% of total revenues in second-quarter 2019.

Per an Akamai report, greater than 40% online login attempts are malicious. Per the company’s Ponemon Institute report, breaches based on malicious login attempts cost $60 million per year on an average to a digital business. These reports reinforce the fact that large enterprises are expected to increase their security budgets to efficiently address security concerns.

Notably, per a ResearchAndMarkets report, the Global Cloud Security market is expected to hit $241.1 billion by 2025 at a CAGR of 11% from 2019 to 2025.

We believe Akamai is well poised to make the most of this growth opportunity by strengthening its solid cloud security portfolio through acquisitions and partnerships in this regard.

Zacks Rank & Stocks to Consider

Currently, Akamai carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Alibaba Group Holding Limited BABA, Chegg CHGG and Anixter International AXE. All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alibaba, Chegg and Anixter is currently pegged at 28%, 30% and 8%, respectively.

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