Cisco Systems announced on Jan. 4 that it has agreed to buy IronPort, a provider of messaging and Web security appliances, for approximately $830 million.
The San Jose, Calif.-based networking giant reported that the deal will consist of a cash and stock transaction, and that it is planning to close the merger sometime during the third quarter of its fiscal year 2007.
Cisco called the e-mail filtering and anti-spam technologies marketed by IronPort, based in San Bruno, Calif., a “natural extension” of its growing security portfolio. The company has made a significant push into the security space over the last several years, aggressively expanding its product lineup, which includes technologies such as firewalls and its NAC (Network Admission Control) authentication tools.
The networking market leader said that IronPorts messaging security software and appliances will specifically complement its threat mitigation, secure communications, policy control and infrastructure management technologies.
“We feel there is enormous potential for enhanced e-mail and message protection solutions to be integrated into the existing Cisco Self-Defending Network framework,” Richard Palmer, senior vice president of Ciscos Security Technology Group, said in a statement. “Using the network as a flexible platform to integrate IronPorts technologies, Cisco will be able to build new security applications as customers demands evolve.”
IronPort, which was founded in 2000 and has 408 employees, will be integrated directly into the Cisco Security Technology Group and report to Palmer, officials for the companies said. Cisco has also been a longtime customer of IronPort.
The acquired companys products are built around two proprietary e-mail security technologies, dubbed SenderBase and AsyncOS.
SenderBase is an e-mail traffic monitoring service that collects data from more than 100,000 organizations such as ISPs, universities and corporations, and uses that information to detect suspicious behavior and virus outbreaks. The technology is also used to identify potential sources of bulk spam, and is licensed to the open-source community and other institutions attempting to research and prevent unwanted e-mail traffic.
All of IronPorts e-mail security appliances run on the firms proprietary AsyncOS operating system, which claims a unique “stack-less threading model” that allows each appliance to support more than 10,000 simultaneous connections. The IronPort OS is built on a version of the UNIX operating system that IronPort claims to have stripped of all nonessential components in order to speed performance and provide for tighter security.
The Cisco deal for IronPort is emblematic of the growing push among major IT platform providers to add greater security capabilities to their products while trying to cash in on the continued demand for better systems defenses from enterprises. Cisco, which has long competed in the market with its firewalls and secure networking products, has made a significant push further into the market over the last year, specifically around its NAC technologies, which aim to keep unauthorized users off of corporate networks.
While the $830 million price tag for IronPort will likely be viewed by some experts as expensive, as IronPort had an estimated $25 million in revenues during 2005, the deal will not come as a surprise to analysts who have predicted that major IT platform providers such as Cisco will continue to snap up profitable security businesses.
IBMs October 2006 buyout of Internet Security Systems for $1.3 billion in cash is another deal that illustrates the trend, as is storage market leader EMCs $2.1 billion acquisition of authentication specialists RSA Security, announced in June 2006.
This push by larger security software providers to diversify their product lines and generate opportunities in emerging sectors of the security market will spur more deals in 2007 than the industry has seen over the past several years, analysts said.
“Were seeing that large companies are trying to expand their portfolios and become end-to-end providers of enterprise-class security technologies,” said Jon Oltsik, an analyst at Enterprise Strategy Group.
“In order to do that, they must cherry pick among the other providers and look for specialists from the venture-backed startup world,” he said. “In addition to traditional security players, well also see more deals made by large IT companies, such as in the case of EMC-RSA, as these companies try to win larger enterprise deals that demand some level of security expertise.”
As another example of the type of deal he expects to materialize in the coming year, Oltsik pointed to Check Point Software Technologies November 2006 buyout of encryption specialists Pointsec Mobile Technologies for $586 million. Check Point also agreed to buy network intrusion detection specialist NFR Security for approximately $20 million in December 2006.
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