The Cohesity-Veritas Merger, F5 AppWorld, and What's Ahead for Security Vendors | This Week in Tech
hello and welcome to This Week in Tech I'm Shelley Kramer managing director and principal analyst here at the cube research and I'm joined today by CS Kavala independent analyst with ZK research and member of our Cube Collective community of analysts and thought leaders zus great to see you hey Shelley how you been you know since the last time we talked which was about two seconds ago I've been great so and I decided Zas and I decided to launch this series this weekly series called This Week in Tech and so we just recorded what was our first episode this will be our second episode and we felt like we spent the majority of the time in in the prior conversation talking about announcements coming out of Cisco Cisco's WebEx live event in Amsterdam um and so we decided we would hop on again and record Another uh short video conversation about sort of other things that are happening in the tech ecosystem that we think are interesting and worth talking about so with that we're going to dive into the conversation that's on many people's minds the Veritas cohesity emerger and the implications for data security and AI platforms I know um I know you have many thoughts on this and I think that you know some folks see this as you know less of a merger and more of a strategic alignment you know bringing kind of the individual strengths of these two companies together to provide more comprehensive Solutions which is not unusual in today's Tech world right right um we've got two key players in the data protection industry highly fragmented industry um each of those players bring different skills and different kind of benefits I think to this Zas I know you wrote about this um for silicon angle and and called this uh this a a market that is ripe for consolidation and and in your article you highlighted some some marketing advantages of this of this merger and and those included did reduced customer acquisition costs you know and and it used to be that cohesity was fighting against largely Veritas and Dell for customers and so Veritas brings a pretty robust customer ecosystem into the equation so of course then we'll see reduce customer acquisition costs um you mentioned Global expansion cohesity customer base is largely centered in the United States veritos has customers across the world so you know cohes is I think Big Brand and Market presence combined with Veritas is larger footprint will help with customer acquisition um you know you also mentioned the the fact that you thought that cohesity is big customer base meant that it has a large data set for AI and and then bringing the veritos customer base into that equation will help no doubt supercharge the company's AI efforts and and lastly you touched a little bit on the financial benefits and that's always a big part of any of any situation like this and veritas brings profitability into the equation which I think allows the companies then to spend more on R&D and expansion and Innovation and and be able to kind of do all of that in a in a speedier manner so um touched on a lot of the a lot of the pros that you outlined in your article yesterday let's weigh in a little bit what do you think yeah it was an interesting move um uh you know when I when I look at the uh the landscape and I'm looking at a spreadsheet of all the vendors and data protection space I think there's 50th so that's a lot a lot right and there's really only a handful that matter right that that are of significant size and cohesity um in veritos were two of them although at 3% share cohesity was a relatively small player right although nobody's a big player I think the market leaders ve with 12% so that tells you how fragmented it is and so it is right for consolidation um in now one of the things I pointed out in my post is in general I'm not a big fan when a disruptor um acquires a legacy provider and um and I did caveat that within General because it it often denotes uh that the innovators growth had slowed down Michael fer from cohesity reach out to me he said how dare you you're wrong about this we haven't slowed down here's an IDE linked to an IDC report that says we're growing and indeed at 3% they are showing a higher growth rate than see a ve who's about 10% or you know um which but again he was four times as big so take that with what you will but on the point that they they still they are growing in um in the teens which is good so uh and the other reason I found it curious though is they both go after the same customer segment which is large Enterprise and so there will be some product rational ization to do um I also found it interesting that from Veritas it wasn't the all of veritas right they took pieces of it they didn't take this the SMB product they took the large Enterprise product at least if they thinking the SB product You could argue open up a different segment for them right um so you know and I I also think the cultures are different everybody says the cultures are aligned but you never know until you get into it but veritos has been on a slow decline for the better part of two decades right they were by the defacto standard for a long time and they have sh they have been the the biggest share donor for the last oh I don't know 15 years and um and so they've largely been focused on keeping the customers they have or cohesity is the culture has been really more about customer acquisition and so often those two things don't really gel so I do think there's a lot of potential for the deal but I also think there's a lot of risk for the deal and um for the price they paid um they could have acquired a lot of customers you know for that amount and maybe given them a customer base the the one thing shelle that I think companies don't often understand when they make Acquisitions like this is just because you're the incumbent vendor nobody's going to hand you the business and I remember yeah I remember when when myel and shortel merged myel bought shortel for its Cloud platform and they thought all the the myel customers would automatically jump on the shortel cloud but what they found out was that you know customers were still going through their regular RFP process and the incumbency didn't make diff make a difference at all if you're going to change vendors you're going to change vendors then you're going to weigh your incumbent in as with equal footing as any other one and so um I I think that the thesis may be that you become the deao upgrade but that doesn't always happen and so there's there's the risk right so you took on $2 billion in debt in order to do this so your execution better be FAS and I think in the short term the convolt and VHS and Dells they're going to jump all over the customer base with all this fud telling them why this isn't a good deal and so San punin I will say the CEO is he's a he's an execution machine but this is something he's got to execute sooner than later though because there's the more uncertainty there is the more competitive fud will be out there which puts more doubt in the customers Mark well and you know I mean there are some product redundancy issues and integration when you have a situation like this integration is always a challenge and a lot of times customers don't want to Wade through that muck you know and I think that if I are the competitors in this space that's what I'm going to be coming to my customers and my prospects talking about you know do you really want to slog through this and and you know what's that going to look like and what kind of a pain in the neck is it going to be so I I do think that is a definite challenge for them yeah well we'll see what you know obviously that's a again when You' when you anytime you enter a consolidation play um it execution does depend on a a lot of things including staff reduction product rationalization um you know the margin profiles of both companies are quite different and so there's a lot of moving parts and um you know I do think you know Sanjay Puna has provve me he can execute so let's you know this is time for him to do that yeah yeah well you know and in your article you also mentioned the challenge of debt management is issue you want to touch on that a little bit Ian well especially today um with with interest rates being so high right if it was a few years ago where you had sub 2% interest rates it's free money um but but to you know so there there'll be about I think the the new story said they'd be about 1.6 billion Revenue combined and they got two billion in debt right so that means a good chunk of their earnings every year will go to pay off the interest and then they go to service the debt so right if they can actually make this company some you know one plus one equals 5 and IPO and raise lots of money they could pay that under debt yeah if the if the integration takes longer than expected they shed some customers the revenue base drops from that 1.6 now your Revenue uh to um to debt ratio goes up right you know changes and then um and then then you wind up with a problem on your hands right um you know we've seen many companies go through that right a VI riverbed companies like that and so you know for and this is why crisp integration has to happen sooner than later to make sure that that one plus one does equal five and they're be able to capitalize on this and raise the money they need to be able to pay off the debt you know it is interesting the the chatter um among you know analysts and others in the space you know some people have viewed this as a you know C cohes has been looking for opportunities for alliances and Partnerships as you mentioned um Sanjay punin has a background in leading successful Acquisitions so that's a positive thing but there are other elist who think this is you know who are less than enthusiastic about this one comment I saw was you know this is this reminds me of the disastrous semantic Veritas merger and so it's interesting to see the different voices on you know in the analyst community on this and you know one thing I know for sure well there a lot overlap there right so I mean I think that's a valid statement yeah yeah so we we'll be watching that's for sure so with that now I know you last week were at um F5 app worlds event took place in San Jose and um hopefully all that rain business was done uh well the event was inside so that was good it rained a little bit obviously yeah uh no I have a lot of friends in the area who have really been sort of inundated with all the crazy yeah we had we we had like uh you know leaks in our sun room and things like that but uh we get a lot of rain that's for sure yeah so you know as expected at this or pretty much any event AI was pretty much in every conversation and every presentation I know that F5 announced the F5 AI data fabric which is a new data platform signed to deliver um you know putting AI to work to provide better app and API protection and and more quickly more easy to use I think that's something you know quick and easy to use those are the key um parts of any value prop today um this data fabric is designed to help adapt and respond to threats in a quick way um generative AI is opposed to improve the user experience um I know that F5 said they'll be introducing an an F an AI assistant later in 2024 that'll give customers an intelligent partner I don't know who's not doing this right you know everybody everywhere um but this this uh f5's NLP interface will allow users to ask questions of their data and generate dashboards in real time and I can see this is being incredibly valuable just like we're learning you know to um voice use voice commands in terms of creating images and things like that that functionality that we're starting to get accustomed to I think being able to you know look at your data ask questions have dashboards generated in real time that would be huge um and then you know part what F5 is saying that this will assist with is with help implementing a policy or generating product configurations and things like that and the tools expected to act as an embedded customer support manager which lets customers act ask their questions to get recommendations based on the collective knowledge available to F5 and this is where I think is something worth thinking about you know your um your knowledge base is only as Val valuable is the amount of data that's fed into it right and so you know when you have a question engine and you're asking for Solutions or recommendations or whatever you know your knowledge base needs to be constantly being fed and it needs to be pretty robust so that'll be interesting to watch yeah I was there actually speaking at the investor event and um F5 is are fascinating company and I'll talk about the structure of the company first then why the AI stuff matters so if and it's um the application delivery controller space isn't one that's um for a lot of people's obvious as to what it does right so a server is easy right it's a Ser Network boxes um uh provide Network traffic when you when you deploy a workload there are a bunch of things that you need around the workload to make it work better you need to load balance you need DNS you need to encrypt SSL traffic or decrypt it right you need uh different types of Security Services and so F5 has always been that product that sits between the applications and the network I characterize it as the Rosetta Stone it talks networking it talks applications and it transl that translates those things to make sure the apps run optimally now as app architecture has changed so have the feeling factor for application delivery controllers so you needed a virtual one so when you think about what happen with virtualization I could put a workload in motion if I'm using only physical adcs how do I then take those ADC services and move it with the workload I got to do a virtualized version so as apps mve to the cloud I have to create a cloud you know U version of adcs as things have moved more to Containers I need containerized Services right as the app the API economy has driven right now I need API level services and so historically uh when you look at the companies that have played in the space there have been different companies that have serviced each one f5's done a roll up of a bunch of different products engine X voltera they just bought a company called whb that does API level ones and they're the only company that's created a plat an ADC platform where all your application and security services that you need are available from them now the reason AI becomes important is let's say I want to create a security policy that doesn't allow certain users to access certain applications or I want to uh if uh some user authentication fails I want to deny access to these types of services well if I've got five different types of adcs in five different places I'd have to make sure those policies are in alignment right so now I can create once propagated out across the environment right so I think that's beautiful music right yeah and to me they're they're a fascinating company and one that's largely misunderstood um because they play a really important role um I know there's some criticism from some Financial analyst that think well you can just buy your load balancers and things from the cloud you can but an AWS load balancer isn't going to work in gcp and PCP one's not going to work an Azure right so they're the only ones that create that cross plow Fabric and if you believe so my message to the financial analyst was if you believe the world's going hybrid multicloud nobody's gonna argue with that if you believe that increases complexity right then F5 is the only one that can create that fabric that sits between that cloud layer or the that hybrid multicloud layer in the apps create can create those services so um uh so I think that uh they're they're really in kind of a unique position in that I I like them their positioning here uh I I think that and I think what AI does is it just allows them to to continue to reduce complexity so the more complicated the world becomes from an app perspective the more you need a company like F5 to simplify I agree I agree and you know I'm going back to you know the the interactive dashboards and things like that I mean being able to query things like how many attacks did my infrastructure experience last week how many of those were SQL injection attacks where are they coming from that kind of functionality I think is really attractive and I do think that you make a really really good point um in terms of you know things are getting so complex and the more the vendors can do to simplify user experience in every way I think they simplify functionality simplify adop you know speeds adoption all these things I think this is really really important rig so uh I know that you know we covered a couple of things here and I think we're going to talk a little bit now as we wrap up this show about just what we're seeing in terms of performance vendor performance in the security sector and you know in short security is as strongest is ever makes perfect sense you know they the rise in cyber threats is astronomical that is not expected to to stop anytime soon you know as all of us race to embrace Ai and integrate AI into our business operations THB actors are using AI to help speed and launch uh attacks and that sort of thing so so it's really interesting let's talk a little bit about what we're seeing a little bit on the earnings front I know you mentioned fortet earlier and the fact that they might have kind of crushed it yeah forette put up a very strong Q4 uh was you know a beating raise for them uh their stock jumped 16% after and after hours trading guidance as well yeah and I think you know there's obviously I think foret a very um um the execution there's always been very strong right that they don't do things that don't directly lead to revenue uh they could Market better uh but for the most part forets uh you know their executions always been very strong but I do think the secular trends that are following this concept the security platform it's creating some Tailwinds for them and Pao and zc the bigger security vendors um and I think you know a aiso said this to me earlier uh or last year I guess since we're 2024 now where he's he finally understood that you best to breed everywhere doesn't lead to best-in-class threat protection and what he was talking about was if I try and go best to read everywhere now from a policy perspective and a configuration perspective there's so much heavy lifting involved that I I just can't keep up right I and um I think um so we are seeing more of a drive towards platform and now this is where the interesting Dynamic comes from is the forign that platform better than Palo alos and which is there better than cisos or you know how do you measure the performance of the security platform so I don't think companies ever going go down to one platform but I do think you'll the days of 200 security vendors is rapidly coming to an end and companies will actually look for Hey Z can you pick up can you pick up I don't know if it's internet on your end or my end what's going on but it's has to do with your trans transmission and so if you could just pick up uh this kind of maybe start over with this Vance I I I can't tell exactly where we glitched but you actually completely went away for oh second streamyard does record locally right yes and then and then upload so even if you couldn't see me but I can start over yeah I couldn't hear any audio or anything so you know we can just just kind of dive in again just in case okay all right well for they did announce ears this week and they put up a very strong beat and raised quarter they raised um the their numbers for uh for next quarter as well it was a Q4 they finished off the year strong uh now this isn't a surprise to me because I do think the Tailwinds created by the shift to security platform is helping them but also the other bigger security vendors and so we're seeing a bit of a rising tide here um and I I think what we're seeing here is finally the realization from Security Professionals in fact the ciso said this to me last year that he finally understands that best to breed everywhere doesn't lead to best class threat protection and we discussed that a little bit further and and he talked about how with when you try and do best and read everywhere um you wind up with the from a management and policy perspective having to do all that on a box bybox basis or a vendor by vendor basis and that the manual overhead on that is it's it's just astronomically high and so especially now with AI becoming a big part of security you want to have more data from you know fewer vendors and so I don't think companies ever going out One Security platform but they're likely they pick two or three that they decide to go forward with and uh you know foret certainly has become one of them but I think an interesting challenge for the vendor community and buyers is how you differentiate these security platforms is the for interet platform really better than palow or is palos better than Cisco so is Cisco where the scaler where does the scaler you yeah I mean it's it's very difficult to tell the performance of these things um I guess until you're breached you know at that point maybe it's maybe it's too late but uh uh I do think this is a a trend we'll continue to see is more and more companies converging and consolidating down their security vendors especially in the AI era where you do need a unified data set yeah yeah absolutely agree absolutely agree well with that unless there's something else you'd like to touch on I think no I think uh you know we're g I think security is gonna be fun to watch we should see lots and lots of innovation here rsa's coming up I'm expecting while I while we are Consulting down to security vendors there's always new startups coming and so there's never a sleepy day in the world to cyber never a dull moment and you know when you say something like there's never a sleepy day what I think about all the time is truly how cisos get a minute sleep because I I just feel like it's so such a stressful job so much responsibility so much constantly changing I mean um it is you're right they do not get they can't I do not know who would want to be a cesil for a bank or a government institution or you know retailer where people utility critical infrastructure yeah yeah absolutely yeah uh and you know what paying them a whole lot of money is great but they're still you're still carrying around that huge responsibility and so much stress and and it's you know as you said it's a rapidly evolving landscape and you know threat actors are just going to keep getting better you know and and so anyway that's why you need AI you got to fight fire with fire if the threat actor using AI you have no choice but use a back 100% so with that we're gonna wrap this second episode of This Week in Tech Zas carala thank you so much for joining me I look forward to being back here with you again next week and to our viewing and listening audience thank you and we'll see you next time
2024-02-22 03:57
