Cisco ( CSCO) is hardening its hardware lineup. The computer networking giant agreed Monday to pay $39 million in cash for closely held Internet security shop Riverhead Networks. The 44-employee business, based in Cupertino, Calif., specializes in network protection software and will become a part of Cisco's Internet switching unit. The deal is due to close this summer. Riverhead develops applications that monitor network traffic and identify and defend against so-called denial-of-service attacks. Typically these attacks disrupt operations by flooding a network with requests, crippling its resources. Cisco has been loading more security functions on its Net equipment to help boost sales in growth areas like network fortification and data storage. Last year, Cisco paid $154 million for Okena, an intrusion prevention system developer. The acquisition is the latest in a long line of small purchases for Cisco. The company, confronting tepid growth in its core network-gear business, has some $21 billion in cash but has shown few indications of how it will spend the money beyond buying back stock. The Riverhead deal comes as Cisco confronts new challenges in its evolving Internet gear business. Last month, rival Juniper ( JNPR) jumped headlong into the security side with a $3.3 billion deal for NetScreen ( NSCN). Analysts say hardware makers like Cisco and Juniper hope software will help offset narrowing margins on equipment sales, especially as demand flags and lower-cost competitors take more turf. Cisco shares fell 18 cents, or 1%, to $22.32 amid a broad selloff Monday.
Even though AT&T tried a last-minute bribe of promising 5,000 new U.S. jobs to help gain support for the deal, the Justice Department filed a complaint to fight the combination of the nation's No. 2 and No. 4 wireless carriers.