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 Ulevich 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. Ulevich wrote. "That's an important distinction."
Write to Don Clark at don.clark@wsj.com and Lisa Beilfuss at
lisa.beilfuss@wsj.com
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