Cisco to Buy Network Security Company OpenDNS -- Update

By Don Clark And Lisa Beilfuss 

Cisco Systems Inc. on Tuesday said it agreed to buy closely held OpenDNS for $635 million, the latest move by the networking giant to boost its security business.

OpenDNS, founded in 2006, maintains a network of domain name servers to help route Web traffic in competition with those provided by Internet service providers and telecommunications carriers. Individuals and companies use OpenDNS services to reach websites more quickly, among other purposes. The San Francisco-based company claims 65 million users and operates from 25 data centers, Cisco said.

In recent years, OpenDNS shifted its strategy to stress security services based on its network. The company has said its services can help block computer attacks from particular Internet domains, for example, and can encrypt Web traffic in ways that limit eavesdropping and other threats.

Cisco, based in San Jose, Calif., is best known for routing and switching systems used to handle Internet traffic and move information within corporate data centers. But the company has also been building a large business offering security software and services.

Last year, Cisco acquired cybersecurity firm Sourcefire for $2.7 billion and bought malware-detection technology company ThreatGrid Inc. The security business represented about 4.3% of Cisco's overall revenue in 2014.

David Goeckeler, a Cisco senior vice president overseeing its security business, said the Internet traffic that OpenDNS monitors would help his company detect and respond to security threats much more effectively.

"It provides us a global visibility," Mr. Goeckeler said. "We get a lot more intelligence about what is happening in the world."

The Silicon Valley networking giant expects to complete the transaction in the first quarter of next year. The deal comprises cash and assumed equity awards, plus retention-based incentives for employees of OpenDNS, which has more than 300 employees.

OpenDNS Chief Executive David Ulevitch is expected to continue running the company under Cisco's ownership. In a blog post, he noted that Cisco had made a convincing case that the two companies could have a broader impact on the market working together.

"We didn't decide to sell OpenDNS. We decided to sell OpenDNS to Cisco," Mr. Ulevitch wrote. "That's an important distinction."

Write to Don Clark at [e-mail] and Lisa Beilfuss at [e-mail]

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