3 ms·

Isn't that the gross income they made last year. How can they afford this?

• ttul 5y ago
  Very rough analysis using numbers that are probably wrong, so please don't kill me: Cloudflare stock trades at a huge multiple of revenue. I'm guessing very roughly that Area 1 probably earns around $10M/yr based on their LinkedIn headcount of 96. Cloudflare trades at roughly 30x revenue. So Cloudflare just paid 16x revenue for Area 1 and it boosted Cloudflare's revenue by $10M, which to Cloudflare investors is worth $300M. In other words, you'd expect Cloudflare's valuation will go up by $300M as a result of this acquisition, less the $162M that was paid to buy Area 1, for a net increase of roughly $140M or so.
  • devoutsalsa 5y ago
    I remember reading about Company A trying to acquire Company B for X in an all stock deal, but the deal didn't go through for some reason. A few years later, Company A bought Company B for 5X in an all stock offer, 5 times the original offer, and many people complained that Company A was vastly over paying. But between the first & second acquisition attempt, Company A's stock had increased by 7x, making it actually cheaper to pay 5x for the acquisition.
  • ttymck 5y ago
    Is all revenue equally valuable? Or, perhaps even if that is not true as a rule, your approximation is still useful?
  • ipaddr 5y ago
    fyi: yearly revenues are 4 times higher for cloudflaire. Area one makes as much in a year that cf makes in a 1/4.