Cisco Systems Inc. has agreed to pay $2.35 billion for security startup Duo Security, the companies announced Thursday morning, beefing up the networking company’s software offerings.
Duo is an authentication service that focuses on two-factor authorization, helping to identify a company’s employees across a range of devices or applications, a product somewhat similar to Okta Inc. OKTA, +4.75% , which went public in 2017 and currently has a market cap of more than $5 billion. The deal gives Cisco CSCO, -1.02% , one of the larger players in the security market, a cloud native to boost recurring revenue and services.
“We’ve been building a world-class security architecture for some time,” Cisco Security executive David Goeckleler said in an interview with Marketwatch ahead of the announcement Tuesday morning. “What Duo allows us to do is extend that architecture to wherever users are.”
Duo had raised about $118 billion in venture funding, according to FactSet, and had previously been valued at about half the total Cisco is paying. The deal, which will be paid out in cash with some assumed equity awards, is expected to close in the first quarter.
Duo co-founders Dug Song and Jon Oberheide told MarketWatch in the Thursday morning interview that they feel they have developed a “new firewall for cloud and mobile,” and that combining with Cisco will be “jet fuel for the business.”
“Cisco is a company we’ve been working with quite some time,” said Song, who serves as chief executive and will continue to lead the business within Cisco. “They have a unique command of the modern market.”
Cisco planned a conference call to discuss the deal in more detail at 9 a.m. Eastern time Thursday morning.