Okta CEO Todd McKinnon on Friday defended his company’s decision to acquire Auth0, calling the rival company a complementary asset to its identity and access management business.
Okta’s shares have fallen 10% since announcing the $ 6.5 billion all-share transaction after Wednesday’s close. The sales figure represents more than a fifth of Okta’s market capitalization and a $ 1.92 billion valuation award Auth0 received after a financing round last summer.
“This is a company that is getting ready to go public and, as you know, public markets value public companies in a way,” McKinnon told CNBC’s Jim Cramer.
He appeared on “Mad Money” alongside Eugenio Pace, the chief executive of Auth0.
“If you look at how we are valuing this, it is positive growth for us,” added McKinnon. “In fact, we pay a multiple of the revenue slightly below ours, but at the same level.”
Auth0 is an identity management platform for application developers based in Bellevue, Washington. It competes with Okta, a $ 28 billion cybersecurity company based in San Francisco. Okta provides security tools to authenticate users, such as password authorizations, access to online networks.
Auth0 will operate as an independent arm within Okta when the transaction closes in late July.
When asked about the need to acquire another identity provider when Okta already has its own offerings, McKinnon said the partnership would give his company a better way to pursue customer identity and access management.
He explained that the $ 30 billion workforce identity market represents 75% of Okta’s revenue, while the $ 25 billion customer identity market accounts for 25% of revenue. Okta focuses more on pre-built and pre-configured solutions, while Auth0 is more focused on application developers built for a specific purpose, he added.
Auth0 is “a much more flexible and extensible product and does exactly what the developer needs to do, which is why the two solutions together are so attractive,” said McKinnon. “They offer customers great choice and great flexibility and great value and really solidify that $ 25 billion [total addressable market]. “
Okta’s shares fell 4.54% to $ 215.96 on Friday. The company on Wednesday reported revenue of $ 234.7 million in the fourth quarter, an increase of 40% over the previous year. It showed a net loss of $ 75.8 million, down from a loss of $ 50.5 million in the same quarter last year.