Cisco Stays in Security Race

Networking giant Cisco's(CSCO Quote) $830 million purchase of email security company IronPort is an attempt to bring its portfolio on par with those of rivals that made similar moves more than a year ago.

Cisco, which had long been a partner of IronPort, can now further advocate its strategy of creating a "self-defending network" where security is integrated into the network infrastructure.

San Bruno, Calif.-based IronPort was founded in 2000 and had raised more than $90 million in venture funding. The company, which makes an email and messaging security box that offers antivirus, antispam and Web security for businesses, is estimated to have generated sales of more than $100 million in 2006.

"This move highlights Cisco's commitment to security and provides them with a platform from which they can more effectively compete against Microsoft(MSFT Quote), Symantec(SYMC Quote) and others, and partner with innovative, emerging technologies," says Charlie Rice, principal with the investment-banking firm East Peak Advisors.

Shares of Cisco were recently up 24 cents, or 0.9%, to $27.96.

While it's a pricey acquisition, according to Merrill Lynch analyst Tal Liani, "IronPort's security gateway target market will grow from $1.1 billion in 2006 to $3.4 billion by 2009, a 46% [compound annual growth rate] which would support a premium valuation," wrote Tiani. Merrill Lynch has an investment-banking relationship with Cisco.

And Cisco needed the transaction to level the playing field. Email and messaging security has attracted the attention of big networking and IT security companies, and the segment has been an active space for acquisitions. Last year, Microsoft acquired the enterprise antivirus firm Sybari; that followed Symantec's purchase of the email security player Brightmail for $270 million in 2004.