Palo Alto Networks Inc. (NYSE: PANW) which makes firewalls to protect companies from cyber attacks, said it would buy a tiny Israeli security firm, Cyvera, for about $200 million U.S. in a move that some analysts expect will crimp profits over the next few years.
Palo Alto's shares gained $2.19, or 3%, to $75.32 U.S. in early morning trading on Tuesday. The stock trades within a 52-week range of $39.08 U.S. to $80.84 U.S.
FBN Securities analyst Shebly Seyrafi estimated that the deal would lower Palo Alto's profit by about 10% in 2014 and by about 20% in 2015.
Seyrafi, however, kept his "outperform" rating on the company's stock, saying the acquisition of the early-stage Cyvera was Palo Alto's "investment in the future."
Cyvera's software protects businesses from cyber threats by blocking unknown, zero-day attacks on computers running Microsoft Corp's Windows software, including ATMs and cash registers.
Palo Alto Chief Executive Mark McLaughlin told Reuters that the company planned to add technology to fight attacks on Apple Inc's Mac computers, and mobile devices such as those running on the iOS and Google Inc's Android operating system.
Cyvera currently has about six customers, according to McLaughlin.
Zero-day cyber attacks exploit a vulnerability in computer systems and networks known only to the attacker.
FBR Capital Markets analyst Daniel Ives said he viewed the deal "as a very smart acquisition that could significantly expand their (Palo Alto's) total addressable market opportunity in cyber security."
Seyrafi estimated that the deal would increase Palo Alto's total addressable market by about a quarter to $20 billion U.S.
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