F5 Networks acquires Shape Security for $ 1 billion to strengthen online fraud protection services

The F5 tower in downtown Seattle. (Photo GeekWire / Kurt Schlosser)

F5 Networks will pay approximately $ 1 billion to acquire Shape Security, a Santa Clara, California-based company that sells a fraud prevention platform to banks, airlines, retailers, government agencies and more.

The acquisition, announced on Thursday, will help F5 strengthen its application protection services. It is the largest acquisition to date for Seattle-based F5, which paid $ 670 million to buy the popular Nginx web server technology earlier this year.

F5 Networks acquires Shape Security

"Beyond opening a fast-growing $ 4 billion adjacent market, Shape's AI-powered machine learning capabilities will scale and expand F5's extensive portfolio of application services and capabilities. to optimize and protect customer applications in an increasingly complex multiple cloud world, F5 President and CEO François Locoh-Donou said in a statement.

Shape recently hit a $ 1 billion valuation after raising a $ 51 million F-Series round in September. The 8-year-old company raised $ 183 million from sponsors, including C5 Capital, Kleiner Perkins, GV, HPE Growth, Norwest Venture Partners, Wing Venture Partners and others.

Shape says it mitigates over one billion fake transactions per day. It has $ 70 million in recurring annual revenue. Clients include nine Fortune 50 customers; eight of the 12 largest banks in the United States; five of the world's top 10 airlines; and five of the top 10 credit card issuers.

"When it combines the F5 and Nginx experience with more than half the world's applications in all types of environments, Shape's vision is to mitigate MILLIONS of application attacks per day. who knows how to secure more applications and more value than any company in the industry, "wrote Locoh-Donou in an email to today's employees." We believe this makes F5-Nginx-Shape absolutely essential for all digital organizations around the world. "

F5 estimates that the acquisition will increase its software revenue growth from 35 to 40 percent to 60 to 70 percent next year. It expects to reach a non-GAAP EPS balance point within 24 months of closing the acquisition. The company is using cash and a $ 400 million loan to finance the purchase.

The agreement is subject to regulatory approval and is expected to close in the first quarter of 2020.

"From the beginning of Shape, we have seen a consistent customer-after-client pattern: the use of F5 technology to deliver and enable its applications," said Derek Smith, Shape's co-founder and CEO. "We now look forward to the opportunity to integrate deeply into the F5 platform for application delivery and security: F5 provides the optimal traffic flow insertion point for fraud and abuse prevention solutions in Shape industry leaders. "

Shape plans to retain its Silicon Valley headquarters as Smith and his 375-person team will join F5, which had 5,325 employees on September 30.

Smith previously started iEngineer, which was acquired by Oracle, and Oakley Networks, which was acquired by Raytheon. He was the chief cyber policy adviser to the Department of Defense before launching Shape Security with co-founders Sumit Agarwal and Justin Call.

Founded in Seattle more than 23 years ago, the F5 is valued at nearly $ 9 billion and is one of the region's leading employers, but goes unnoticed in part due to the behind-the-scenes technical nature of its work.

The company is in the middle of a transition from years of hardware manufacturing to serving customers running data centers to focus on software for clients running on public cloud infrastructure from vendors like Amazon, Microsoft. and Google.

"In exposing our vision to become the leader in multi-cloud application services in 2017, we have been taking deliberate and disciplined steps to make our future identity a reality," Locoh-Donou wrote in the email. . "We know what it takes to win; and make no mistake, we're playing the offensive."

Earlier this week, F5 said it had taken steps to ensure the security of master software builds for Nginx after Russian police officials visited Nginx's Moscow offices on December 12 with a court order in connection with an intellectual property dispute.

F5 recently moved to a new 48-story office tower in central Seattle.