Networking equipment maker Cisco Systems is buying security technology developer Riverhead Networks of Cupertino, California, for US$39 million (AUD$51.85m) in cash.
The privately-held company specializes in software that protects against attacks on corporate and telecommunications networks, such as distributed denial of service (DDoS) attacks, according to Janey Hoe, Cisco's director of business development. "Riverhead has unique technology that's patented. It can eliminate attacks based on malicious network behavior; learning the profiles of what's normal, detecting problems and being able to take action and respond quickly," she said.
Cisco currently holds a 10 percent stake in Riverhead Networks and will be buying the remaining company shares in a deal that is expected to close in Cisco's fiscal third quarter, between May and August, according to Jeff Platon, Cisco's senior director of product and technology marketing.
The purchase of Riverhead Technology continues Cisco's move to position itself as a provider of secure networking products. On March 12, Cisco announced its intention to purchase SSL (secure sockets layer) VPN (virtual private network) technology company Twingo Systems Inc. for $5 million in cash and last year it acquired network security software provider Okena Inc. for $154 million.
"These acquisitions are all part of our strategy of bringing together various, serious components and technologies that support against threats that are known and unknown," Platon said. "Customers will see a financially stable organization that can enable enterprise and service provider customers to build intelligent networks that are also integrated with security for threats against business processes and services," he said. Similar acquisitions in the future can be expected, Platon said.
Cisco will initially take Riverhead's existing products and then work to integrate that technology into Cisco's secure global networks product and service line, Hoe said. Riverhead, with 44 employees. will become part of Cisco's Internet switching business unit, she said, adding that Cisco will try and keep job cuts to a minimum.
As equipment sales have decreased, Platon and Hoe said that Cisco has been taking a multi-pronged approach to finding areas of sales growth in software and services, by growing its security technologies while bolstering its Internet gear business. "Others having been trying to follow us but without the inclusive strategy that Cisco has," Platon said. "Our viewpoint is comprehensive: it's desktops, it's servers, it's at the edge, it's at the core. Others are just beginning to join us on our path."
But Cisco is up against increasingly stiff competition that's willing to spend large amounts of capital in an effort to gain ground against the market leading company. Last month, router vendor Juniper Networks Inc. bought NetScreen Technologies Inc., a maker of firewalls and VPN technology in a deal valued at $4 billion.