Nikesh Arora, CEO of Palo Alto Networks, appears on CNBC’s “Squawk Box” at the WEF Annual Meeting in Davos, Switzerland on January 16, 2024.

Adam Galitsi | CNBC

Palo Alto Networks buy cloud security software assets from IBM as part of a broader partnership that will give the cybersecurity company access to more consultants and a larger customer base.

In a joint press release, the companies said Palo Alto is acquiring IBM’s QRadar cloud software for an undisclosed sum and migrating existing customers to its Cortex Xsiam security platform. IBM will train more than 1,000 of its consulting employees on the Palo Alto products.

Consolidation is intensifying in the security software industry as companies prepare for a swarm of AI-powered attacks. In March, Cisco completed its $28 billion acquisition of Splunk, the networking company’s largest deal to date, acquiring the leading provider of security information and event management (SIEM) software.

Earlier on Wednesday, two other companies in the SIEM market, Thoma Bravo’s Exabeam and LogRhythm, announced plans to merger.

Nikesh Arora, CEO of Palo Alto, told CNBC that his company should be better prepared to take on Splunk.

“Clearly, this is just a hotbed of activity in the consolidation in cybersecurity,” Arora said.

Palo Alto and IBM have been working more closely together for months, and Arora said he has spoken with IBM CEO Arvind Krishna about how to develop their partnership. But they both sold SIEM software.

“We used to get stuck there,” Arora said.

In December IBM said its consulting group will offer Palo Alto’s competing Cortex Xsiam software to customers. IBM will now adopt Cortex Xsiam as well as Palo Alto’s Prisma Sase 3.0 product suite. Palo Alto will incorporate IBM’s major Watsonx language models into Cortex Xsiam, in addition to using models from Google.

The SIEM category has been around for over 20 years, but Palo Alto just introduced Cortex Xsiam two years ago. It’s catching on quickly, with more than $90 million in bookings last quarter, and Arora said the company is taking market share from “everyone.”

For IBM, a more robust lineup of modern consulting security tools could help the company meet its stated goal of mid-single-digit revenue growth in 2024. In the first quarter, revenue rose 3%, up from 2% the consulting segment.

Palo Alto is growing much faster than IBM. In January quarter revenue jumped 19%. The company will report results for the latest quarter on Monday.

Palo Alto has more than doubled in value over the past year, and its shares are up 6% year-to-date, lifting the company’s market cap above $100 billion. Shares rose more than 1 percent in extended trading. IBM is up nearly 5% this year and is now valued at $154 billion.

The companies said the transaction should close by the end of September, subject to regulatory approval and other conditions.

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