Okta CEO Todd McKinnon on Friday defended his company’s move to acquire Auth0, calling the rival company an addition to its identity and access management business.
Okta shares are down 10% since it announced the $ 6.5 billion all-stock transaction following Wednesday’s close. The sales figure represents more than a fifth of Okta’s market cap and a premium on the $ 1.92 billion valuation Auth0 received after a round of funding last summer.
“This is a company that is on its way to going public and, as you know, public markets value publicly traded companies in a way,” McKinnon told CNBC’s Jim Cramer.
He appeared in “Mad Money” alongside Eugenio Pace, the CEO of Auth0.
“If you look at how we value it, it contributes to growth,” added McKinnon. “We actually paid multiples on sales slightly lower than ours, but in the same margin.”
Auth0 is an identity management platform for app developers in Bellevue, Washington. It competes with Okta, a $ 28 billion cybersecurity firm from 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 at the end of July.
When asked about the need to purchase another identity provider while 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 accounts for 75% of Okta’s sales, while the $ 25 billion identity market accounts for 25% of its sales. Okta focuses more on pre-built, pre-configured solutions, while Auth0 is more aimed at purpose-built app developers, he added.
Auth0 is “a product that is much more flexible, extensible and does exactly what the developer needs to do, which is why the two solutions together are so compelling,” said McKinnon. “They provide customers with great choice, great flexibility and great value and really amplify that $ 25 billion [total addressable market]
Okta’s shares fell 4.54% to $ 215.96 Friday. The company reported fourth-quarter revenue of $ 234.7 million on Wednesday, up 40% from a year ago. It posted a net loss of $ 75.8 million, down from a loss of $ 50.5 million in the same quarter a year ago.