In a $2.35 billion cash deal announced Aug. 2, Ann Arbor-based internet security company Duo Security will be acquired by Cisco Systems, a multinational information technology and networking corporation based in San José.

The acquisition is expected to close during the first quarter of the 2019 fiscal year. Duo will become part of Cisco’s networking and security unit, with Dug Song, Duo CEO and co-founder, staying on as the company’s general manager. There will be no employee relocations, and until the deal closes, the two companies will continue operating separately.

Duo provides cloud-based unified security access and multi-factor authentication to help secure users from cyberattacks. Founded in 2009, the company now has locations in Ann Arbor, San Mateo, Austin and London and reported over $100 million in annual revenue for 2017. Song and co-founder Jon Oberheide were named 2017 Entrepreneurs of the Year by the Michigan Venture Capital Association

During its Series D funding round in Fall 2017, Duo set a state record for venture capital funding, raising $70 million from investors including Cisco.

Todd Graham, the director of security strategy for Cisco and a University of Michigan alum, said Cisco and Duo grew closer personally and professionally after the investment. He noted they had already been partners for several years due to their many similarities and shared customers.

“There are many, many customers that use our solutions together already,” Graham said. “They’ve been partnering with us on a certain level – on a more basic level – for years now, let’s call it three, four years. Really only the last year have we been, as part of the investment, working to figure out how we could work more closely together.”

Describing the acquisition of Duo as a natural extension of the relationship, Graham said the two companies offer very compatible products. According to Graham, Cisco’s Identity Services Engine helps protect users of a particular network, whereas Duo’s security platforms provide access control even when a user goes off-network.

“We have provided solutions for quite some time that allow you to bring the notion of someone’s identity, who they are, and create policy around them on the network,” Graham said. “What we obviously have discovered is the world has moved to a multi-cloud world.”

Graham said combining Cisco’s products with Duo’s multi-cloud security solutions makes sense.

“The notion that I’m always on the corporate network doesn’t really hold water anymore,” Graham said. “What we want to do is extend our capabilities to provide security and provide policy and access control to those resources, anywhere a user was in the world.”

In a press release, Song agreed the two companies will make a powerful team.

“Our partnership is the product of the rapid evolution of the IT landscape alongside a modernizing workforce, which has completely changed how organizations must think about security,” Song wrote. “Cisco created the modern IT infrastructure, and together we will rapidly accelerate our mission of securing access for all users, with any device, connecting to any application, on any network. By joining forces with the world’s largest networking and enterprise security company, we have a unique opportunity to drive change at a massive scale, and reshape the industry.”

According to those involved, Duo and Cisco will benefit in different ways from the deal. Jim Brady, head of product and technology public relations at Cisco, pointed out Duo will gain access to Cisco’s many partners.

“We have a global presence and very deep and long-standing relationships with business customers, and so we think that our reach is going to enable Duo’s technology to be used worldwide and for other global companies to benefit from it,” Brady said.

In an email interview with The Daily, Duo spokesperson Jordan Fylonenko said the deal with Cisco will help Duo move forward with its goals.

“This is an exciting new chapter for Duo in its mission to democratize security, making it easy, effective and accessible for everyone,” Fylonenko wrote.

On the other hand, Graham said, Cisco will gain the ability to recruit talent from the University, with which Duo has a close relationship.

“The fact that Duo has a very close partnership with the University, both formally and informally, that’s just another opportunity for Cisco to capture talent in a way that we haven’t been able to before,” Graham said.

Paul Krutko, CEO and president of Ann Arbor SPARK, a nonprofit that supports economic development, also praised Dug Song’s outreach to U-M students. He added Ann Arbor has a rich technological scene that students should consider when hunting for jobs post-graduation.

“They should take a good hard look at the technology companies that are right around where they’re going to school,” Krutko said. “You don’t have to go to San Francisco to have success.”

Because of the mutually beneficial nature of the acquisition, Graham said, neither party expressed major concerns. He said the deal will only serve to accelerate Duo’s success, in no way weakening its presence in southeastern Michigan.

“Our commitment to Michigan is not going to change,” Graham said. “Cisco is excited about Duo and it’s very excited about the talent and the richness of the resources that are in the Michigan area.”

Krutko said the deal, the largest transaction an Ann Arbor-based tech company has ever seen, demonstrates Ann Arbor’s ability to foster technological innovation and brings positive attention to the city.

“If you look at the coverage across the nation, this is a great message that says a place for a company or other talented people to have success in the new technology fields is Ann Arbor, and that we have the access and the resources that can support that,” Krutko said. “This kind of story is great for the folks at Duo themselves, it’s great for Cisco, but it’s also sort of a testament about the community and that’s free marketing.”

Krutko noted Ann Arbor is home to a plethora of successful tech companies, including Google, Barracuda Networks and Thompson Reuters. He said it’s very powerful to have Cisco, a Fortune 500 company and the world’s largest networking solution provider, acknowledge Ann Arbor as a technology hub.

“One of the key messages about Ann Arbor is that we are an effective tech location; we have a number of companies who have grown substantially here,” Krutko said. “We’re a place that is very attractive for talented people.”

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