F5 buys Volterra for $500M, says it will free edge apps from ‘server cages’

F5 Networks, a company that delivers applications, is purchasing the startup Volterra for about $500 million. Volterra will give F5 an edge-cloud stack that works, universally, across public and private clouds. F5’s CEO said the combined technology will allow enterprise applications to “break out of CDN jail.”

With the addition of Volterra’s technology, F5 says it is creating a software-based edge platform for enterprises and service providers that will provide unlimited scale. F5 also stresses the security features inherent in both its and Volterra’s software, compared to commodity security found in most content delivery networks (CDNs).

“Current edge solutions are simply inadequate for today’s enterprise customers,” said François Locoh-Donou, CEO of F5.

On a conference call with reporters, Locoh-Donou said that currently, enterprise apps must contend with edge infrastructure that was built for content delivery and caching. He said apps “are limited to their CDN server cages.” He explained that the apps are inextricably connected to specific hardware, and when apps need to work across multiple clouds it requires manual stitching of network, compute and orchestration components. He said F5 and Volterra “will let apps break out of their cages” and be able to run on any server, virtual or otherwise. This provides the freedom to move workloads easily between public clouds and data centers. 

François Locoh-Donou
François Locoh-Donou

Both F5 and Volterra honor industry-standard containers and APIs. Their joint technology will provide a software-defined edge that caters to app developers. “With Kubernetes containers, dev-ops will be able to build once and deploy globally,” said Locoh-Donou.

Industry analyst Scott Raynovich with Futuriom said of the acquisition, “It’s a good move. Volterra has a multi-layer cloud networking solution based on software, and this helps F5 diversify into cloud-native networking tools.”

Locoh-Donou said that prior to making the decision to buy Volterra, whose software creates a virtual edge, F5 considered expanding its own edge solution called Silverline. But he said it would have required significant amounts of capex. “Volterra leapfrogs that completely,” he said. “They have put together a software stack and a global network that allows them to leverage any compute including public clouds. We do not have to spend a lot of capex to try and replicate a large number of pops that others have built.”

The transaction is expected to close in the first quarter of calendar year 2021, and all of Volterra’s management team will join F5.

Ankur Singla, Volterra’s founder and CEO, said in a statement, “I am excited to work closely alongside François and the F5 team to help pioneer the evolution of the edge to deliver more adaptive, dynamic application experiences for all of our customers.”

In a blog post Singla wrote, “When we started Volterra, multi-cloud and edge were still buzzwords and venture funding was still searching for tangible use cases. Fast forward three years and COVID-19 has dramatically changed the landscape.” 

For its part, F5 is already known for its cloud-native, container-based technology that helps operators deliver applications across multiple private and public clouds via its Application Delivery Controller.

RELATED: F5 augments telco container-based infrastructure

The analysts at MKN Partners said in a research note today, “We see the acquisition further expanding F5's total addressable market (TAM) and positioning F5 to become a formidable competitor to content delivery network providers such as Akamai, Fastly and Cloudflare. Even better, the Volterra acquisition should position F5 to become one of the market leaders in the emerging 5G-based edge cloud opportunity.”

Telcos are beginning to partner with hyperscalers such as AWS, Google Cloud and Microsoft Azure to jointly deliver enterprise applications at the edge. But telcos are also concerned about letting these hyperscalers into their networks. They don’t want to end up becoming just “the pipe” that delivers last-mile connectivity while the hyperscalers reap the huge profits from enterprise relationships.

RELATED: Google Cloud, AWS and Azure want to 'friend' telcos, but not every telco is ready to click 'accept'

Perhaps a software-based solution from F5 and Volterra could provide service providers with a new option to deliver edge services without partnering with hyperscalers.

F5 and Elliott

Activist investor Elliott Management has taken a stake in F5, according to the Wall Street Journal.

Elliott typically takes a stake and then speaks with company management about strategies to boost its stock price.

In addition to announcing its acquisition of Volterra, yesterday, F5 also raised its short-term and long-term revenue outlook. It updated its fiscal years 2021 and 2022 total revenue growth CAGR to 7% to 8%, from 6% to 7%, and its long-term revenue growth target to double digits from 8% to 9%.  F5 also reiterated its commitment to return $1 billion of capital over the next two years, including the initiation of a $500 million accelerated share repurchase in fiscal year 2021.