F5 to acquire multi-cloud security software maker Volterra for $500 million, raises financial outlook

Application security pioneer F5 this afternoon said it will spend half a billion dollars to acquire privately held, Volterra of Santa Clara, California, a maker of distributed multi-cloud application security and load-balancing software.

The company also pre-announced revenue for the December quarter, its fiscal first quarter, in a range higher than analysts have been expecting and higher than the company’s own forecast for revenue offered back in October. 

Shares of F5 rose by 3% in late trading to $186.02.

F5’s CEO, François Locoh-Donou, said in prepared remarks that the current cloud infrastructure is inadequate for application security.

“Current edge solutions are simply inadequate for today’s enterprise customers. It’s time to break out of closed edge systems that only perpetuate the pain of building, running, and securing apps,” said Locoh-Donou. He added, “the success of F5’s software transformation has put us in a position to deliver on the potential of Edge 2.0 and redefine our competitive position.”

Volterra’s VoltMesh service promises to make it quick to transition between cloud providers by abstracting APIs across different providers.

More details are available in a blog post from F5 and a blog post from Volterra.

Volterra’s CEO and founder, Ankur Singla, will stay at F5 in “key management roles,” the company said.

F5 said it will spend “approximately $440 million in cash” plus “approximately $60 million in deferred consideration and assumed unvested incentive compensation to founders and employees.” 

F5 raised its outlook for the December quarter’s revenue to a range of $623 million to $626 million, which is higher than the outlook it offered in October for $595 million to $615 million, and also higher than Wall Street’s current outlook for $605 million. 

The company said its earnings per share will come in above its forecast previously offered for $2.26 to $2.38 per share, which is on a non-GAAP basis, so it excludes certain costs. The Street has been modeling $2.34 pe share.

F5 also raised its outlook for 2021 and 2022 fiscal year growth, what it refers to as “Horizon 2.” It now sees 2021 and 2022 growth, on a compounded annual basis, of 7% to 8%, versus a prior forecast for 6% to 7%.

CEO Locoh-Donou said of the new outlook, “We are on track to deliver our best quarterly results since we embarked on our transformation, with approximately 10% revenue growth fueled by continued strong software demand along with resilience in our systems business.” 

F5 also reiterated a commitment to make a total of a billion dollars worth of share repurchases over the next two years. That would be almost ten percent of the company’s market capitalization. 

F5 management will host a conference call to discuss the deal this evening at 2:15 pm Pacific/5:15 Eastern, and you can tune in via the company’s investor relations Web site.