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Cloudflare (NYSE:NET) recently closed its acquisition of Area 1 Security, a California-based company whose cloud-native platform stops email threats by discovering and eliminating them before they cause damage to a company’s computer systems. The addition of Area 1 strengthens Cloudflare’s ability to provide a Zero Trust security platform. That adds value to NET stock. Cloudflare’s share price is up more than 51% in the past year. The latest news is likely to keep it moving higher.
Cloudflare Chief Executive Officer Matthew Prince said in its press release announcing the completion of its acquisition of Area 1 that providing Zero Trust security without email protection built into the platform is nearly worthless. As of Apr. 1, Area 1’s email security capabilities were available for enterprise customers. All other plans will gain access to its email security in the months ahead.
Why email security? After announcing the acquisition, the company’s Chief Technology Officer, John Graham-Cumming explained its rationale in a February blog post:
“When Cloudflare was in its infancy we considered dealing with the email-borne threat problem but opted to concentrate on building defences for networks and the web. Over time, we’ve vastly expanded our protection and our customers are using us to protect the entirety of their Internet-facing world.”
According to Area 1, approximately 90% of all cyber security damage is from phishing. This makes email every business’s greatest potential threat. Cloudflare had been using Area 1’s security platform for its employee emails for some time. The results were so good that it decided to buy the company.
Cloudflare’s 2021 results were outstanding. On the top line, it grew revenues by 52% to $656.4 million with $64.6 million in net cash flow from operating activities. In addition, it finished the year with more than 140,000 paying customers, 1,416 each accounting for more than $100,000 in annual revenue.
The latest acquisition will likely keep its customer base multiplying in 2022 and beyond. As its revenue grows at 50%-plus per year while turning profitable, shareholders can expect investors to award it with a premium valuation.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.