AI offers a head start when the cybersecurity sector is consolidated

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The cybersecurity vendor sector is expected to save some of its fat in 2020, and companies that incorporate sophisticated technologies such as artificial intelligence into their products are likely to succeed.

A number of significant acquisitions in 2019 suggest further consolidation in 2020. The banner contracts included last year

VMware Inc.

The $ 2.3 billion acquisition of Carbon Black announced in August

Broadcom Inc.

Buy $ 10.7 billion deal

Symantec Corp.

Enterprise security business.

"I think we are seeing the beginning of a stronger consolidation of cyber security. The space is too full," said

Rama Sekhar,

Partner at Norwest Venture Partners, based in Palo Alto, California.

More reporting at year end

The transaction value in the information security market, according to Statista Inc., was $ 21.6 billion in the first nine months of 2019 and exceeded the total value of $ 15 billion in 2018. Most of the consolidation is expected to affect companies that specialize in one aspect of cybersecurity and cannot scale to a multi-function platform, Sekhar said.

Some deals are made by larger vendors who choose smaller competitors or want to expand their offerings. Private equity companies may also be interested in companies that have started to grow beyond early growth but need financial support to advance to the next level

Sunil Kurkure,

CEO at

Intel

Capital, the venture capitalist of semiconductor giant Intel Corp. from Santa Clara, California.

"The private equity firms have been very active and have started to collect assets in various areas of cybersecurity," said Kurkure. "There are ways to build a portfolio because there are some companies that have reached a certain size." and they may be more suitable for private equity buyers. "

From a venture perspective, Mr. Kurkure sees four areas where specialized cyber security providers are likely to stand out:

• Automation and machine learning for cyber security

• New ways to solve identity management challenges

• Privacy technologies in the light of regulations, including the California Consumer Protection Act, which will enter into force on January 1st

• Technology to monitor supply chains and third parties

Mr. Sekhar from Norwest agrees that companies that use artificial intelligence in cybersecurity are best positioned to make an impact in 2020.

"What you will see in 2020 is that many companies that use AI in their marketing will be exposed. And many of the cyber security companies that use AI under the cover to solve phishing, malware, and security vulnerabilities are really becoming start shining, ”he said.

Write to James Rundle at james.rundle@wsj.com

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