INSIDE THE DEAL
F5 acquires Volterra for $500m to build ‘edge 2.0’ platform
By Robert Scammell
François Locoh-Donou, president and CEO of F5. Credit: F5
Application services company F5 Networks has acquired multi-cloud startup Volterra for $500m in a deal to boost its ‘edge 2.0’ platform offering.
The definitive agreement will see F5 acquire all issued and outstanding shares of privately owned Volterra. Broken down, F5 paid approximately $440m in cash and around $60m in deferred and unvested incentive compensation.
It brings the Seattle-based company’s acquisition spend to more than $2bn over the past two years.
Subject to regulatory approvals, F5 will gain Volterra’s suite of distributed cloud software solutions, which includes security and networking tools for the edge of an enterprise network.
F5 CEO and president François Locoh-Donou said that the deal would advance the company’s self-described ‘edge 2.0’ platform “that solves the complex multi-cloud reality enterprise customers confront”.
He added: “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.”
In 2019 Santa Clara, California-based Volterra received $50m in funding from investors including Samsung Next Ventures and Microsoft’s Khosla Ventures.
“I am excited to work closely alongside François and the F5 team to help pioneer the evolution of the edge to deliver more adaptive, dynamic application experiences for all of our customers,” said Ankur Singla, founder and CEO, Volterra.
“With our platform, we will extend F5’s application security leadership to the edge, thereby expanding our combined reach in the fastest-growing segment of F5’s $28 billion 2023 total addressable market.”
The deal is F5’s latest move into software services, which had traditionally been focused on networking and hardware.
F5 has raised its revenue outlook in light of the Volterra acquisition. It expects first-quarter fiscal year 2021 revenue to be between $623m and $626m, marking 10% growth.
Controversy remains over the deal
When the State Department gave Congress informal notice of the potential deal last month, Chairman of the House Committee on Foreign Affairs Representative Eliot L. Engel said that the sale “would significantly change the military balance in the Gulf and affect Israel’s military edge” adding that rushing approval of the deal was “not in anyone’s interest”.
Engel added: “My consideration of this sale will include several factors. First, we must maintain Israel’s qualitative military edge, as provided in US law, and ensure Israel’s military superiority in the region, as Israel remains our most crucial ally there. Israel currently has exclusive access in the region to the F-35, which has guaranteed its military edge over the last several years. As Congress reviews this sale, it must be clear that changes to the status quo will not put Israel’s military advantage at risk.”
The lawmaker said that increased activity from Russia and China in the Middle East meant that Congress would need ‘unimpeachable assurances’ that the fighter’s advanced technologies would be safeguarded. He added that a sale to the UAE would ‘inevitably’ generate demand for the jet from other neighbouring countries. In October, Qatar made a formal request to purchase the F-35.
Senate Foreign Relations Committee Ranking Member Senator Bob Menendez said: “As feared, the details of this proposed sale suggest President Trump is seeking to rush through an increase of complex weapons systems into a volatile region seemingly without serious consideration of US interests or the legal parameters of Israel’s qualitative military edge.
“Claiming Israel will maintain its edge while offering Abu Dhabi the same number of these sophisticated stealth warplanes as Israel simply does not add up. Recklessly accelerating the timeline around a reportedly artificial deadline precludes sufficient consideration of these issues by the national security professionals in the Departments of State and Defense.”
Menendez added: “Congress has statutory authority over foreign arms sales and our responsibilities will not be relinquished. The American public has a right to insist that the sales of US weapons to foreign governments – especially those of this magnitude and lethality – are consistent with US values, our national security objectives, and the safety of our closest allies.
“The Trump administration’s refusal to answer our questions about how the national security interests of both the US and Israel will be served, or undermined, by such a sale is a sure-fire way not to get Congressional support to move forward with this sale.”
Will President-elect Biden change course?
After the potential F-35 sale became public in October, Anthony Blinken, a Foreign Policy Advisor to Biden and former Obama-era official, was reported by the Jerusalem Post as saying that he had ‘concerns’ about what commitments the US Government may have made to the UAE.
Since then, US President Donald Trump lost his re-election bid, with President-elect Joe Biden set to take office in January. Democrat Senator Chris Murphy said that the Trump administration approving the sale after losing the election was “completely inappropriate”, adding: “It's a transparent attempt to narrow options in the Middle East for President-elect Biden when he takes office.”
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