Cisco Systems Inc. said Thursday it has agreed to pay $830 million in cash and stock to acquire privately held IronPort Systems Inc., a maker of anti-spam and antivirus security products.
The deal is expected to close in the third quarter of fiscal 2007. Analysts said the acquisition will help Cisco further shed its image as solely a maker of networking infrastructure gear and capitalize on products and services that utilize the network itself.
Cisco, which makes the routers, switches and other devices used to link networks and direct traffic on the Internet, was already dominant in the network security arena.
But executives at the San Jose-based company said they were keenly interested in entering the $2-billion-plus messaging security market, and further profit from the need of businesses to protect their applications from the growing amount of Internet threats.
"Enterprises need to provide increased protection for various kinds of communications - e-mail and Internet access, as well as protecting data going outbound," said Richard Palmer, senior vice president of Cisco's Security Technology Group. "We see this as a very rapidly expanding market," growing some 25 percent a year, he said.
Scott Weiss, founder and CEO of IronPort Systems, said the rich offer and the opportunity to run the company as a separate business unit within Cisco won over the management team during negotiations. The deal also allows IronPort to compete better with larger rivals, Weiss said.
"We were a relative pip-squeak among these giants," he said. "Now they've given me the keys to an M1 Abrams (battle tank), and we have the firepower to really do some damage in the security market."
Cisco said it plans to retain virtually all of IronPort's 408 employees and keep its headquarters in San Bruno.
The acquisition allows Cisco to use data gathered by IronPort's technology and stop threats such as spam and computer viruses before they can reach a company's computer system, said Zeus Kerravala, a network infrastructure analyst with Yankee Group.
Kerravala added that he expects Cisco to pursue even more acquisitions in this market in the coming year.
"In 2007, you'll see Cisco come out of the network and have a direct impact on how applications perform and are secured - and this is the first step," he said.