Cisco plans to acquire cybersecurity firm Duo Security for $2.35 billion

  • Duo Security provides cloud-based tools to prevent security breaches on devices.
  • The acquisition is Cisco's largest since it bought AppDynamics for $3.7 billion in 2017.
  • Cisco CEO Chuck Robbins has been acquiring companies that can boost Cisco's cloud services.
Chuck Robbins, CEO of Cisco.
Katie Kramer | CNBC
Chuck Robbins, CEO of Cisco.

Cisco said Thursday it will buy cybersecurity company Duo Security for $2.35 billion in cash and stock.

Cisco's stock was down 1 percent on the news.

Duo Security is a private company based in Ann Arbor, Michigan. The company provides cloud-based tools to prevent security breaches on devices, Cisco said in its announcement. The deal is expected to close by the end of Cisco's fiscal 2019.

It's Cisco's biggest acquisition since the $3.7 billion deal for application management company AppDynamics in early 2017 and continues CEO Chuck Robbins' string of moves to push the company deeper into software. In October, Cisco agreed buy BroadSoft, a developer of call center technology, for $1.9 billion.

Cisco's security business grew 11 percent in the fiscal third quarter, almost three times the rate of the company's overall growth. Still, security accounted for only 4.7 percent of total sales, as Cisco continues to count on hardware like switches and routers for the bulk of its revenue.

Robbins, who took over as CEO in 2015 from John Chambers, is tasked with turning around a mammoth legacy tech company as the industry moves toward cloud computing and open-source software. Cisco shares have gained 9.3 percent this year, as of Wednesday's close, outperforming the S&P 500, but way behind tech giants Apple, Amazon, Microsoft and Alphabet, which are all up at least 17 percent.

Providing security services to its existing customer base is one of Cisco's biggest efforts. In the latest earnings call, Robbins called security "foundational to everything we do."

"We continue to rapidly innovate in security to address key areas of concern for our customers such as security in their complex data centers," Robbins said. The company developed technology to follow "any workload anywhere across physical and multi-cloud environments," he said.

Thursday's deal isn't Cisco's first big security acquisition. The company purchased cybersecurity vendor Sourcefire for $2.7 billion in 2013 and IronPort Systems, a provider of spam and spyware protection, for $830 million in 2007.