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Comcast (NASDAQ:CMCSA) has acquired cybersecurity firm BluVector for an undisclosed amount.
BluVector has developed an AI/machine learning-enabled cybersecurity detection, visibility, and containment system for network security applications.
With the deal, CMCSA is not only acquiring security technology for its internal operations but also intends to support BluVector’s continuing business offerings.
Arlington, Virginia-based BluVector was founded in 2015 to employ the latest machine learning software techniques to automate and improve security threat detection and containment requirements for enterprises and government organizations.
Management is headed by new CEO Eric Malawer, who was previously Comcast’s General Manager, Cybersecurity Growth and Innovation.
Below is a presentation of BluVector’s approach to machine learning for cybersecurity:
BluVector’s primary offerings include functionalities provided by its machine learning engine:
LLR Partners provided private equity funding to the company in 2017.
Market & Competition
According to a market research report by MarketsandMarkets, the global cloud security market is projected to grow from $4.1 billion in 2017 to $12.7 billion by 2022.
This represents a stunning CAGR of 25.5% between 2017 and 2022.
The main drivers for this expected growth are the increased adoption of Bring Your Own Device [BYOD] & Internet of Things [IoT] trends, a rise in adoption of cloud-based security services, increasing demand for cloud computing and increasing government initiatives, and the emergence of smart cities.
Major competitive vendors that provide clouds security services include:
Acquisition Terms and Rationale
Comcast didn’t disclose the acquisition price or terms and didn’t file a form 8-K or provide a change in financial guidance, so the transaction was likely for a financially non-material amount.
A review of the firm’s most recent 10-K filing indicates that as of December 31, 2018, Comcast had $3.8 billion in cash and equivalents and $177.9 billion in total liabilities, of which $107.3 billion was long-term debt.
Free cash flow during the twelve months ended December 31, 2018, was $14.5 billion.
Comcast acquired BluVector both to grow BluVector’s business and develop new security technologies with Comcast’s investment.
As Don Mathis, GM, Growth at Comcast stated in the deal announcement,
BluVector is a global leader in leveraging AI and machine learning to defend against advanced cyber threats. We’re thrilled that BluVector is part of Comcast and are excited to support its continued growth, even as we explore new opportunities to leverage BluVector technology and expertise.
In the past 12 months, CMCSA’s stock price has risen 6.2% vs. Charter Communications’ drop of (2.85%), as the chart below indicates:
Comcast has consistently produced positive earnings surprises since March 2016.
Source: Seeking Alpha
Analyst ratings are generally quite positive with 21 ‘Strong Buy’ opinions and the consensus price target of $44.38 implies an upside of 16% from its current price of $38.16 at press time:
Source: Seeking Alpha
Analyst sentiment in recent earnings calls has been improving from a drop in mid-2018:
Comcast has acquired BluVector for its network security technology and team.
What is interesting is that it also intends to build BluVector’s business as a continuing entity, at least for the time being.
As a result, Comcast would be getting into the enterprise cybersecurity business or at least acquiring the option to do so.
While it makes sense for the ISP side of the business, it is a curious allocation of resources. Perhaps, management simply wants to maximize the value from the investment.
Also, Comcast may be seeing a way to differentiate its business service offerings by providing a security capability to enterprises.
In any event, acquiring a machine learning security company is certainly a commonplace thing, as the latest crop of cybersecurity startups have migrated to the new technologies in order to automate threat detection and response while minimizing the workload on IT departments.
Assuming Comcast didn’t overpay for BluVector, the addition of a current security solution and potential business makes sense in a growing security threat environment.
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Credit: Google News