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<li>Technology</li></ul> <h1>
Microsoft's Fast Expanding Cybersecurity Offerings Pressure Zscaler, Palo Alto	</h1>
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<div></div> Licensing
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<li><span class="authors-links">REINHARDT KRAUSE</span></li>
<li>09:52 AM ET 07/12/2023</li>
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<p><strong>Microsoft</strong> (MSFT) continues to pressure cybersecurity stocks with new products aimed at companies such as <strong>Zscaler</strong> (ZS), <strong>Palo Alto Networks</strong> (PANW), <strong>Cloudflare</strong> (NET), <strong>CrowdStrike Holdings</strong> (CRWD) and others. MSFT stock continues to shine, with a 38% jump this year, amid an artificial intelligence-driven rally in the technology sector.</p>
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<p>Shares in cybersecurity firm Zscaler edged up on the stock market today. But ZS stock took a hit on Tuesday from a Microsoft security announcement, falling 4.5%. MSFT stock rose 1% to near 336 on Wednesday.</p>
<p>Microsoft's entry into the computer security Secure Service Edge market, known as SSE, also is expected to impact other cybersecurity stocks, such as Palo Alto Networks, Cloudflare and startup Netskope, analysts say.</p>
<h2>Microsoft Expands Cybersecurity Offerings</h2>
<p>&#34;While the offering will be competitive to the SSE vendors, we view Microsoft's competitive position in SSE as less strong than other areas of security where it has long had capabilities (endpoint, identity) and likely to be less competitive in the enterprise segment,&#34; KeyBanc Capital analyst Michael Turits said in a note to clients.</p>
<p>At UBS, analyst Roger Boyd said in his note: &#34;The reaction to ZS stock appears overdone, especially when considering ZS's near-exclusive focus on the enterprise segment.&#34;</p>
<p>&#34;The expectation is that the initial Microsoft Security Edge solution will be primarily aimed at small- and medium-sized businesses,&#34; Boyd added. &#34;Instead, we see this as a bigger risk for vendors with SMB exposure, including Cloudflare and potentially <strong>Fortinet</strong> (FTNT).&#34;</p>
<p>Microsoft has pressured some stocks in the cybersecurity sector by selling multiple products to large companies in discounted deals.</p>
<h2>Security Revenue Booms For MSFT Stock</h2>
<p>The software giant has told analysts that its security business now brings in $15 billion in annual revenue and is growing 40% each year. Microsoft bundles products at its Azure cloud computing business and Office 365 platform.</p>
<p>In addition, Microsoft in early 2023 rolled out a new automated cybersecurity product using generative AI technology. Called Microsoft Security Copilot, the platform uses a new AI assistant to manage threat detection.</p>
<p>Meanwhile, Microsoft did not disclose when the new computer network SSE offerings will be available. Nor did Microsoft announce pricing.</p>
<p>At research firm Dell'Oro, MSFT stock analyst Mauricio Sanchez said in a blog: &#34;For me, the key announcement today was Microsoft's introduction of its new SSE solution anchored to two new products, Microsoft Entra Internet Access and Microsoft Entra Private Access, and an existing one, Microsoft Defender for Cloud Apps.&#34;</p>
<p>San Jose, Calif.'s Zscaler sells cloud-based computer security services via 150 data centers worldwide. Then customers route their business workloads and app traffic to the data centers where Zscaler's security software checks data traffic for malware.</p>
<p>The company gets most of its revenue from Zscaler Internet Access, or ZIA. It's a cloud-based replacement for on-premises web security gateways.</p>
<p>IBD recently featured Zscaler as the Stock of the Day.</p>
<h2>Microsoft Targets CrowdStrike, Okta</h2>
<p>Most Microsoft security revenue comes from email and endpoint security. While basic Office 365 plans offer anti-spam and malware protection, Microsoft upsells advanced anti-phishing and threat prevention tools.</p>
<p>In the endpoint market, Microsoft competes versus CrowdStrike and many others. Endpoint security tools detect malware on laptops, mobile phones and other devices that access corporate networks.</p>
<p>In addition, MSFT stock analysts say Microsoft has also gained traction in identity and access management, or IAM, vs. <strong>Okta</strong> (OKTA) and others.</p>
<p>IAM software verifies the identity of computer network users. Further, the tools manage the usernames, passwords and access policies of employees, customers and partners.</p>
<p><em>Follow Reinhardt Krause on Twitter @reinhardtk_tech </em><em>for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.</em></p>
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