Okta to Acquire Customer-Authentication Provider for $6.5 Billion

Okta Inc.


OKTA -6.89%

agreed to buy a software provider that helps businesses manage customers online for $6.5 billion in stock.

The deal for Auth0 would help push Okta beyond its traditional focus of single sign-on services for businesses and their employees.

Okta shares dropped about 12% in after-hours trading, after closing Wednesday at $241.22.

The stock is up nearly 84% in the last 12 months, in part because of its role in allowing businesses to let their employees work from home by connecting to cloud-based services.

On Wednesday, the company also said it expects revenue to grow 29% to 30% for its new fiscal year to at least $1.08 billion. That would mark a slowdown from the 43% revenue growth it recorded between the two prior years.

Okta’s latest guidance doesn’t include the Auth0 acquisition. The company said the deal would add to its revenue according to an investor presentation.

Auth0 targeted a $25 billion market tied to customers’ identity, while Okta’s main end market, focused on workforce identification, amounted to a $30 billion opportunity, it said.

“In an increasingly digital world, identity is the unifying means by which we use technology—both at work and in our personal lives,” Okta Chief Executive

Todd McKinnon

said in a statement, adding, “It’s critical that we deliver trusted customer-facing identity solutions.”

Auth0 said on its website that it offers a platform allowing businesses to authenticate those using their services, including both consumers and other companies. “Basically, we make your login box awesome,” the company said on the site.

Clients that use Auth0 include companies tied to travel, financial services and healthcare, according to the site. The company offers developers tools to customize its software, according to an investor presentation from Okta about the transaction.

The deal is expected to be completed during Okta’s quarter that ends in July. Auth0 will operate as an independent business within Okta, the latter company said.

For its fiscal year that ended in January, Okta recorded a loss of $266.3 million on $835.4 million in total revenue.

Excluding stock-based compensation and after other adjustments, the company said it earned about $16 million for the year.

Write to Micah Maidenberg at [email protected]

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Appeared in the March 4, 2021, print edition as ‘Okta Makes $6.5 Billion Deal For Customer Software Firm.’

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