F5 Networks A Buyer, Not Seller? Security Acquisition May Be Plan
F5 Networks ( FFIV ) could be a buyer, not a seller, and might use its sizable cash-on-hand to acquire a data center security provider, says Pacific Crest Securities. Some analysts have speculated F5 Networks itself could be sold, amid its slowing revenue growth . F5 Network stock has clawed back 7% in 2016 after falling 25% in 2015. But F5 Networks stock was down 1.5%, near 106, in early trading in the stock market today . Brent Bracelin, an analyst at Pacific Crest, downgraded F5 Networks stock on Tuesday to sector weight. “Going forward, we see an increasing probability that M&A will have a greater role in defining (F5 Network’s) ‘third act,’ particularly given that F5 has excess cash reserves of $1 billion and robust operating cash flows that exceed $600 million annually,” he wrote in a research report. Seattle-based F5 is the leading maker of application delivery controllers (ADCs) — electronic boxes that direct data traffic to computer servers. ADCs optimize server workloads in corporate and telecom data centers, helping speed up websites and communication networks. F5 Networks has made some small security-related acquisitions , including Defense.Net, a provider of cloud-based security services that help protect websites from large-scale distributed denial of service (DDoS) attacks, as well as Israel-based Versafe, a maker of software that protects Web applications from malware, fraud and phishing attacks. F5 Network’s closest rival in application-based data center security is Imperva ( IMPV ), analysts say. The so-called perimeter firewall market — the main type of firewall — is a crowded field, with Check Point Software Technologies ( CHKP ), Cisco Systems ( CSCO ) and Palo Alto Networks ( PANW ) among the vendors. Another concern is that F5’s revenue growth might not rebound in 2016, Bracelin said. “The Shasta appliance refresh cycle will not drive a return to double-digit product growth, at least not for any quarter this year, and that there is increasing execution risk with a higher probability of M&A within cloud security,” he added. F5 competes with Citrix Systems ( CTXS ), as well as Radware ( RDWR ) and A10 Networks ( ATEN ).