Cisco to Buy Security Software Maker for $830 Million

Top U.S. network equipment maker Cisco Systems said on Thursday it will buy Web messaging and e-mail security firm IronPort Systems for $830 million to tap growing demand for anti-virus and anti-spam software.

The acquisition of the privately held maker of e-mail and Web security software is Cisco's latest move to grow by integrating niche technologies that complement its main product line of routers and switches which direct Internet traffic.

Richard Palmer, senior vice president of Cisco's security technology group, said the deal would help Cisco offer its corporate clients a more comprehensive range of products.

IronPort is known for its "reputation filters," which block spam by examining a sender's record. Blocking spam can help a company save bandwidth as well as save employees the trouble of combing through unwanted e-mail messages.

"IronPort has a reputation on filtering where they know the reputations of people who are sending emails or generating Internet traffic," Palmer told Reuters.

"We can use that information at Cisco for the routers and switches and firewalls to filter traffic," he said.

Cisco said its payment would be a combination of cash and stock, and that the deal is expected to close in the fiscal third quarter. The acquisition is Cisco's fifth largest ever.

IronPort Keeps Independence

While IronPort would become a Cisco unit, Palmer said it would be somewhat independent, with CEO Scott Weiss remaining at the helm and headquarters staying in San Bruno, California. Most of IronPort's 408 employees will stay, he added.

Weiss, who will report to Palmer, said IronPort had been eyeing an initial public offering but decided a deal with Cisco would give the company access to a wider range of companies.

IronPort's current client focus is on large technology, media and financial services firms.

"There's a huge business market that we're not tapping," he said.

Weiss said that the Web messaging security market is growing at around 25% each year. IronPort said in November that worldwide spam volumes had nearly doubled year-on-year.

Gartner analyst Peter Firstbrook said the move made sense for Cisco as corporate customers would likely appreciate higher-quality spam and virus filters.

"It's not going to make a significant impact in terms of financials, but it is one more product in their quiver," he said.

He said the move was particularly positive for IronPort amid consolidation in the security software industry.

The world's largest software maker, Microsoft, bought e-mail security firm FrontBridge in 2005, about a year after security software maker Symantec bought Brightmail.