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Microsoft, Google, Qualcomm and Baidu Fund CloudFlare

Zacks Equity Research

Software developer Microsoft MSFT along with other tech giants, Google GOOGL, Qualcomm QCOM and Baidu BIDU announced a strategic joint investment in Internet performance and cyber security startup, CloudFlare.

The funding round was led by Fidelity Investments along with Google’s investment division Google Capital, Microsoft, Baidu and Qualcomm’s investment arm Qualcomm Ventures. CloudFlare raised $110 million from this round of private financing, which valued its business at $182 million.

Launched in 2009, CloudFlare is a company offering a content-delivery network (CDN) with services that can speed up any Internet application or websites while also protecting them from hackers’ attacks. CloudFlare currently operates in more than 30 countries and has a customer base of four million. With the new funding, the company wants to pursue further international expansion, mobile and enterprise applications, and create large-scale networks.

Its management also views the joint investments by the tech titans as important relationships that can drive its growth across geographies. Indeed, the fact that so many big names have backed it automatically sends out the message that the company’s technology is valuable.

CloudFlare customers include many of the world's largest Internet properties, financial institutions and national governments. In the last one month, CloudFlare says it processed over 5% of all Internet requests worldwide, and mitigated over 200 billion cyberattacks for its customers.

Last week it partnered with Baidu to launch a unified global platform to help build a faster, more secure and more intelligent Internet in China and throughout the world.

On Sep 9, Google partnered with CDNs including CloudFlare, Fastly, Highwinds and Level 3 Communications to make it simpler and cost effective for developers who run applications on its cloud service to work with one of these CDNs. CloudFlare is already Google’s authorized Cloud Platform Technology Partner.

CloudFlare is working with Qualcomm to improve connections between its network and phones with Qualcomm chips. CloudFlare is also looking out for ways to deepen its partnership with Microsoft.

As for Microsoft, investment in a cyber security firm with cross platform and multi-national abilities will broaden its own cross platform efforts.

Also, cyber security is an area of concern and investment today, given the increasing number of cyber-attacks. Cloud technology is being increasingly adopted by businesses to innovate and drive growth. However, this makes them vulnerable to cyber-attacks, which can cost millions of dollars.

Microsoft initiatives to improve protection will make its cloud more appealing to businesses. It will broaden its corporate customer base and boost its top- and bottom-line performances. So looking at CloudFlare’s fundamentals, this could be a critical investment for Microsoft.

Microsoft has a Zacks Rank #3 (Hold).

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