F5 Networks buys Shape Security for $1 billion to lock down application security

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F5 Networks is buying Shape Security to offer more protection for its portfolio of application services. (Pixabay)

F5 Networks is ending the year with a bang by buying privately-held Shape Security for $1 billion. The deal, which is subject to certain adjustments, blends F5's expertise in protecting applications across multi-cloud environments with Shape's fraud and abuse prevention capabilities.

Santa Clara, Calif.-based Shape sells its fraud prevention platform to banks, airlines, retailers, and government agencies. Shape uses bot, fraud and abuse defenses to thwart credential stuffing attacks whereby cybercriminals use stolen passwords from third-party data breaches to take over online accounts.

Shape offers protection through its artificial intelligence and machine learning abilities, which are supported by cloud-based analytics to protect against attacks that slip through other fraud and security measures. Shape said its fraud prevention platform detects and blocks up to 1 billion fraudulent or unwanted transactions daily.

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Specifically, Shape’s application protection platform evaluates the data flow from the user into the application and uses sophisticated cloud-based analytics to decide if the traffic is good traffic or bad. Due to F5’s location in the data flow of traffic in over 80% of Fortune 500 application infrastructures, F5 its able to provide an insertion point for Shape’s security services.

The combination of F5 and Shape holds the promise of dramatically reducing the time and resources needed for organizations to deploy online fraud and abuse protection.

“With Shape, we will deliver end-to-end application protection, which means revenue generating, brand-anchoring applications are protected from the point at which they are created through to the point where consumers interact with them—from code to customer,” said F5 President and CEO François Locoh-Donou, in a statement. “Beyond opening a fast-growing $4 billion adjacent market, Shape’s machine learning and AI-powered capabilities will scale and extend F5’s broad portfolio of application services and expand our ability to optimize and protect customers’ applications in an increasingly complex multi-cloud world.”

RELATED: F5 Networks sticks a fork in $670M deal to buy NGINX

Earlier this year, Seattle-based F5 snagged virtual application delivery controller (ADC) vendor NGINX for $670 million. With Shape about to be in hand, F5 will be able to offer customers security protection across a wide range of its applications and NGINX's as customers undergo their digital transformations.  

“Since Shape’s inception, we observed a consistent pattern in customer after customer: the use of F5 technology to deliver and enable their applications,” said Derek Smith, co-founder and CEO of Shape, in a statement. “Now, we look forward to the opportunity to deeply integrate into F5’s platform for application delivery and security—F5 provides the optimum traffic flow insertion point for Shape’s industry-leading online fraud and abuse prevention solutions.

"This, combined with F5’s global go-to-market scale, means we can jointly protect significantly more customers’ applications and users from sophisticated attacks and malicious traffic.”

Shape Security was founded in 2011. In September, it crossed the $1 billion valuation threshold after raising $51 million in a Series F round of funding to bring its total outside investment to $183 million.

Smith and his leadership team will join F5 "in key management roles," once the deal closes in the first quarter of next year. Shape will also stay in its Santa Clara, California headquarters.

F5 expects to achieve break-even non-GAAP EPS within 24 months of closing the acquisition. The company is using cash and a $400 million loan to fund the purchase. The deal, which still needs to clear the customary regulatory hurdles, has been approved by both boards.

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