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Cisco to Acquire Portshift to Boost Container Apps Security

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Cisco Systems (CSCO - Free Report) recently announced its plan to buy out Portshift to augment security for Kubernetes-based cloud native applications. However, the financial terms of the deal have been kept under wraps.

The acquisition, subject to customary and regulatory approval, is projected to conclude in the company’s first-quarter fiscal 2021. Post the closure, Portshift will join Cisco's Emerging Technologies and Incubation (ET&I) Group.

Portshift is a Tel Aviv-based start-up that specialises in assisting clients to safeguard their containerized applications running on Kubernetes from coding to runtime. It was founded in 2018 by Ran Ilany and Zahar Kaufman.

The start-up’s security platform automates the process and encryption of data across services and detects misconfigurations across applications that pose threat to data security.

It is backed by Team8, which is a company-building venture capital firm that helps start-ups which focus on cyber, AI, fintech and enterprise technologies.  
Portshift’s acquisition will help Cisco provide customers with increased security across various cloud-based apps and multiple devices along with a simplified consumption model that includes cloud-first Secure Access Service Edge (SASE) capabilities.

Solid Uptick in Container Security Solutions: Key Catalyst

Increasing usage of cloud computing especially hybrid cloud and rapid adoption of Dockers is expected to boost market growth for containerised applications, per Mordor Intelligence report. The worldwide application container market is anticipated to witness a CAGR of 29% from 2020 to 2025.

This, in turn, will boost market for security solutions required for managing the containerized applications.

Per a Veritis report, global container security management market is projected to witness a CAGR of 30.9% between 2019 and 2024 and reach $2,178 million by 2024.  The report added that increasing instances of cyber-attacks across container platforms as well as higher demand for microservices and requirements to comply with strict regulatory requirements will boost the demand for container security solutions.

Containerization application refers to operating system level virtualization process that runs different applications without initiating the entire VM each time for each app. This offers benefits of portability, isolation and ease of management compared with virtualization. Also, containerised apps are being utilised to run microservices application architecture.

With Portshift buyout, Cisco’s customers will be able to experience increased flexibility in operations with enhanced multi-level security and achieve better administrative control.

Acquisitions Help in Expanding Footprint

In the past few years, the company acquired quite a few companies that expanded its products’ suite and enabled it to capture a larger share of the security solutions’ market.

In 2018, Cisco acquired privately-held Duo Security for $2.35 billion in cash. The integration of Duo’s zero trust multi-factor authentication technology with Cisco’s network and cloud security platforms enhances security features and mitigates phishing incidents on devices and safeguards customer data.

Apart from that, the company also acquired CloudLock, OpenDNS, Sourcefire, Neohapsis and ThreatGrid to bolster its security offerings.

The latest acquisition of Portshift will help Cisco gain ground in security solutions markets and bolster revenues in the quarters ahead. In the fourth quarter of fiscal 2020, Cisco’s Security revenues increased 10% to $814 million owing to solid demand witnessed by identity and access, advanced threat and unified threat management solutions amid high growth in Internet traffic.

Markedly, in a blog post, Liz Centoni, Senior Vice President, ET&I had highlighted the highly-fragmented nature of the application security market. Cisco is looking to enhance its presence in this market by leveraging Portshift’s extensive capabilities that offer security for all stages of the application development cycle.

However, these acquisitions are likely to keep Cisco’s operating margins under pressure, at least in the near term, as it requires significant amount of new investments. Moreover, Cisco is bearing the brunt of sluggish enterprise IT spending due to coronavirus crisis that might impact the demand for its offerings.

Zacks Rank & Key Picks

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

A few better-ranked stocks in the broader technology sector are Garmin (GRMN - Free Report) , Zoom Video Communications (ZM - Free Report) and Jabil (JBL - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Garmin, Zoom Video and Jabil is currently pegged at 6.8%, 25% and 12%, respectively.

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