Publicly traded identity management company Okta is acquiring one of its main competitors, Seattle-based startup Auth0, in a stock deal valued at $ 6.5 billion, the companies announced Wednesday.
The transaction will provide Auth0 with a fixed number of Okta shares priced at $ 276.21 each, the companies said. Okta’s stock had closed Wednesday at $ 241 a share, giving it a market capitalization of $ 31 billion. But the stock was trading down more than 11% after business hours, as Okta also reported quarterly revenue of $ 234.7 million, an increase of 40% year-over-year, on non-GAAP net income of $ 8 million. on Wednesday.
In an interview, Okta CEO Todd McKinnon said the move was part of the company’s drive to be one of the “five or six primary clouds” that customers will turn to as market leaders, citing Microsoft. , Salesforce and Zoom like other competitors for such status.
“For us, identity has to rise to be one of those primary clouds, and if it doesn’t, it will be subsumed in other clouds and Okta won’t reach its potential,” McKinnon said.
Primarily a business tool for companies to help track and manage their employees’ identities and credentials when using job apps, Okta wins on Auth0, a service that focuses more on how companies interact with their customers, McKinnon said, with you look at the developer community.
In other words, while Okta sells from the top down, to CIOs or technical leaders, Auth0 has built its business from the bottom up.
At Auth0, co-founder and CEO Eugenio Pace said the two companies “agree on a vision” for that identity cloud of the future, or what Pace calls an “identity operating system.” In a common refrain for high-growth tech startups joining larger rivals, Pace noted that Okta was at least several years ahead of Auth0 in scale; Joining forces, he insisted, would advance the Auth0 roadmap by five to ten years.
“What excites me is that these companies are compatible, identity is not a division, a part of another group or a necessary evil. This is all we do. Together, we have this opportunity to move the needle in terms of what we can offer our customers, ”said Pace.
Auth0 joins a company that reported $ 835 million in revenue for its most recent fiscal year and is forecasting revenue of $ 1.08 billion to $ 1.09 billion for fiscal 2022. In the meantime, Auth0 is expected to reach a run rate. revenue (a 12-month projection based on the most recent month’s pace) of more than $ 200 million by year-end, McKinnon said.
Forbes He had first heard the rumors that Auth0 was for sale several weeks ago, and two sources said that Okta had become a favorite buyer. But the deal didn’t close quickly as Auth0 considered other options, including other potential buyers or continuing on the path to the IPO. An Auth0 investor who asked to remain anonymous said he expected the company to pursue a public offering instead, given its potential and recent favorable stock market valuations of public cloud computing stocks.
Founded in 2013, Auth0 had raised more than $ 330 million from venture capital investors who had recently valued the company at around $ 1.9 billion in July 2020. Prominent investors included Bessemer Venture Partners, Trinity Ventures , Meritech Capital, Sapphire Ventures, and Salesforce Ventures. The company was ranked 19th on the Cloud 100 list of the world’s top private cloud companies in September.
Antitrust concerns also slowed down the process, a source said. Forbes before the announcement of the deal. The acquisition, although agreed to by both boards, is subject to regulatory approval but is expected to close in the first half of the year, the companies said.
When asked what he would say to employees and supporters who expected Auth0 to test public markets as an independent company, Pace said the result was “fantastic” for all stakeholders. “I certainly don’t see this as an exit for Auth0,” he added. “We are only scratching the surface of what we do.”
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