Microsoft CEO Satya Nadella speaks during a keynote announcing the integration of ChatGPT for Bing at Microsoft in Redmond, Washington on February 7, 2023.
Jason Redmont | AFP | fake images
cloud flare, Palo Alto Networks and Z scaler all stocks fell on wednesday after analysts pointed out Microsoft entry into a part of the cybersecurity market where those three smaller companies already compete. Palo Alto and Zscaler shares fell about 7%, while Cloudflare shares fell 5.5%.
Analysts stressed that the new Microsoft Entra Internet Access and Microsoft Entra Private Access products are in the preview stage, with no pricing details available. But over time, they could strengthen Microsoft’s drive to make security one of its top categories as older areas like Windows go backwards.
In 2022, Microsoft’s security revenue exceeded $20 billion, up 33% from the previous year. CEO Satya Nadella said in a recently released memo that the company’s Security, Compliance, Identity and Management business could reach $100 billion in revenue by fiscal 2030.
Entra’s new products, along with Microsoft Defender for Cloud Apps, fall into a category known as Secure Service Edge. SSE involves providing cloud tools that help corporate workers securely access cloud-hosted and on-premises applications, Joy Chik, president of identity and network access at Microsoft, wrote on a Tuesday. blog post.
The Microsoft Entra Private Access service offers an alternative to older virtual private networks, or VPNs, that allow employees to access internal programs while working remotely. Microsoft Enter Internet Access can help security administrators control employee connections to cloud apps, including Microsoft 365 apps like Teams.
Jefferies analysts, with a Buy rating on Microsoft shares, said the move could have “potential longer-term ramifications” for Cloudflare, Palo Alto and Zscaler, as well as fortinet and Checkpoint Software.
“This is potentially the latest and largest cybersecurity market that Microsoft has yet to enter and is now competing with cloud network security vendors, primarily ZS, NET, PANW,” Morgan Stanley analysts led by Hamza wrote. Fodderwala in a note on Tuesday. Still, they said that gaining significant market share in SSE could prove more difficult than in other parts of security due to the lack of structural ties to Microsoft software. The company gained adoption in endpoint security across Windows and identity products due to integrations into its email software.
“There is not the same presence for SASE/network security, which we believe is more complex given the need to enforce policy in heterogeneous environments,” wrote the analysts, who have the equivalent of a buy rating on the shares. from Microsoft.
Analysts at UBS, with a hold rating on the shares, said Zscaler’s 4.5% move lower on Tuesday seemed “overkill, especially considering ZS’s near-exclusive focus on the enterprise segment and the expectation that the initial Microsoft Security Edge solution will be primarily targeted at SMBs.”
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