Cisco To Buy Cloud Security Company OpenDNS for $635M In Cash

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Cisco announced its intent to buy cloud security company OpenDNS for $635 million this morning. It’s probably not a coincidence that Cisco was one of its investors in a $35 million round in May, 2014.

The $635 million will be paid in cash and assumed equity awards, plus retention based incentives for OpenDNS, according to information supplied by Cisco.

OpenDNS gives Cisco, a network vendor that offers more traditional network edge protection, a Software as a Service vendor that provides security on the move to any device, anywhere, anytime. The purchase builds on Cisco’s strategy to add a cloud security layer, according to a blog post by Hilton Romanski, who leads business development at Cisco.

“The acquisition will extend our ability to provide customers enhanced visibility and threat protection for unmonitored and potentially unsecure entry points into the network, and to quickly and efficiently deploy and integrate these capabilities as part of their defense architecture,” Romanski wrote in in his blog post.

OpenDNS has raised $51.3 million, according to Crunchbase, so the $635 million price tag should offer investors a nice return.

David Ulevitch, founder and CEO was up early this morning and clearly excited about the deal, but was unwilling to comment on the story, referring me to the Cisco communications people.

The OpenDNS team will join the Cisco Security Business Group. The deal is expected to be finalized during the first quarter of fiscal 2016.

OpenDNS has over 10,000 paying customers, over 50 million users (through its free service). It runs 24 data centers, and claims more than 2 percent of the world’s DNS traffic with an astonishing 100 percent uptime, according to information supplied by the company last year.

The service was originally launched as a consumer services for parents to protect kids online, Ulevitch told TechCrunch in an interview last year.

“We had tens of millions of users from start in 2006,” he said.

The company launched its enterprise product in 2009. It works by simply blocking bad traffic and allowing good traffic to flow, thereby acting as a protective layer between the user and the Internet, Ulevitch explained at the time.

Cisco has indicated it will continue to offer the free version of OpenDNS. “The OpenDNS free DNS services will not be affected. Cisco is committed to OpenDNS’ consumer and enterprise DNS services. The OpenDNS products will transition into Cisco upon close of the acquisition,” a spokesperson wrote by email.