Cisco to Acquire Duo for $2.35 Billion, Adding to Security

Ian King (Bloomberg) -- Cisco Systems Inc., the biggest provider of the machinery that forms the backbone of the internet, said it plans to buy Duo Security for $2.35 billion, adding to its offerings in cloud-based security.

Cisco is paying in cash and assumed equity for the private company, which provides technology that checks identities and the trustworthiness of the devices being used to access applications. The transaction is expected to close in Cisco’s fiscal first quarter, which begins in October, the company said in a statement Thursday.

Chief Executive Officer Chuck Robbins has embarked on a spree of acquisitions in recent years, responding to changes sweeping through the networking industry that have threatened growth in Cisco’s main equipment business. As customers shift purchases toward software and services, he’s bulked up in businesses like network security and programs that manage connected gadgets. The moves are aimed at easing Cisco’s dependence on expensive, locked-down hardware and this one adds another layer to the company’s security offerings.

The Duo purchase is bigger than most other deals Cisco has done this year, which generally haven’t exceeded $1 billion. Robbins’ biggest recent buys before Duo include the purchases of BroadSoft Inc., a cloud-based communications company, for $1.9 billion earlier this year, and AppDynamics Inc., which brought in software tools that help companies monitor and fine-tune their business systems, for $3.7 billion in 2017.

Duo’s products are provided via software-as-a-service and its customers include Facebook Inc., Yelp Inc. and Zillow Group Inc. They’re designed to both make it harder to gain illicit access to data and easier to manage and grant right-of-use of a network. Duo, based in Ann Arbor, Michigan, has 700 employees and will help Cisco serve companies that have limited in-house security capabilities, according to Cisco Vice President and General Manager David Goeckeler.

”You can go to Duo’s website and be up and running in ten minutes,” he said in a phone interview. "That’s the future of security.”

Robbins broke a seven-quarter run of sales declines earlier this year, and San Jose, California-based Cisco is on course to grow 3 percent in fiscal 2018, based on the average of analysts’ estimates. While that’s far short of the kind of growth spurt that made Cisco the world’s largest publicly traded company in the late 1990s, it has rekindled investor interest in the company. The stock was up 9.3 percent this year through Wednesday’s close.