PANW Sell-Off An Overreaction? Or Is Market Choosing Best Of Breed Approach?
A look at what today's PANW sell-off may be telling us about the security industry.
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FUD on Wall St.? 🩸🐻
FUD = Fear, Uncertainty, and Doubt
Palo Alto Networks, which was overbought, got 28% of its market cap shaved off in trading hours today due to a strategic GTM shift + lowered full year guidance. It’s clear that PANW is aiming to be the go-to security platform, especially w/ recent acquisitions of Talon (by Palo Alto Networks) and Dig Security (acquired by Palo Alto Networks), but I guess hearing that on an earnings call spooked analysts who don't understand the space well.
Platform v. Best of Breed Approach?
The debate of one security platform vs. best of breed for each security domain is one that's been hotly debated for over a decade. As with anything else, one size doesn't fit all.
Resource-strapped (talent+$$) security orgs benefit from platformization, but give up control, pipe-fitted security coverage, and flexibility.
More mature and well-funded security teams will always tend to shy away from platformization. They want the best of breed solutions that will give them the best fighting chance against attackers.
While it may cost more and take longer to properly set the systems in place to make sense of the signals (i.e., telemetry, logs, alerts, threat intel, vulns etc.) coming from all the different point solutions, they're able to conjure up a security strategy that is best suited for their business.
This is why data-driven security, #SecurityDataMesh, #SecDataOps etc. has gained more traction in recent years. Mature security teams dislike vendor lock in. It often leaves them with blindspots and the inability to correlate or enrich signal with those of other solutions.
Mature security teams want full control over their security data so that they can cross-pollinate (analytics, hunting, enrichment, etc) signal from their different solutions in order to prioritize what makes most sense for them at the time.
What is #1 security priority for one business may not be the same for the other and this is where one-stop-shop security platforms fall short.
Conclusion
In any case, with PANW beating top + bottom line expectations, doubling down on AI security, and Nikesh Arora's killer track record as CEO, I have a feeling the platformization move + new GTM strategy will reap rewards in certain market segments.
Btw, many vendors are going after the consolidation/platformization play.. Maybe not as aggressively as PANW, but look at the product suites of Zscaler, Netskope, Tenable, Wiz, Rapid7, Fortinet, CrowdStrike... You name it. Many are going after the consolidation play. As primary and biggest pure play public security co, PANW absorbs the hit, others take the lessons.
You can access the full earnings report transcript here and check out Nikesh Arora’s CNBC interview w/ Jim Cramer here.
Disclaimer: None of this is financial advice nor express the views of my employer. Just a snapshot of what I've seen first-hand in the security industry! If you enjoyed today’s post, subscribe and share to receive future updates!