Multifactor Acquisition: Cisco Plans to Buy Duo for $2.35B

Networking giant Cisco Systems has agreed to buy authentication startup Duo Security for $2.35 billion in cash and assumed equity, the companies confirmed today.

Duo, founded in 2010 by Dug Song and Jonathan Oberheide, specializes in cloud-based multifactor authentication. Customers of the Ann Arbor, Mich.-based company range from SMBs to major organizations, using its tech to verify users' identities by establishing trust in their identities, evaluating device trustworthiness, and facilitating secure application access.

Now Cisco wants to offer its customers the same as it plans for a future in the cloud.

"Cisco and Duo are aligned in the approach of designing infrastructure for the extended enterprise," said David Goeckeler, executive vice president and general manager of Cisco's networking and security business, in a press briefing on the news. "Users, devices, and applications are at the center of modern security architecture."

The acquisition was driven by three core reasons, he explained. For starters, it will let Cisco extend intent-based networking into multicloud environments. The company currently provides on-premises network access control through its Identity Services Engine (ISE); it plans to offer cloud-based access control by integrating Duo's SaaS model into its ISE product.

Cisco's focus is networking and enterprise security, Goeckeler said. Its intent is to securely connect clients on various networks to any application at a time when more apps are located outside the business and customers are adopting multi- and hybrid-cloud environments.

"The world has landed on multicloud," Duo's Song said at the briefing. "We see a very clear role for us sitting at the intersection of that new network that's being built."

Goeckler's second point was how the Duo acquisition will help simplify policy for cloud security by integrating trusted identity awareness into Cisco's Secure Internet Gateway, Cloud Access Security Broker, Enterprise Mobility Management, and other cloud-based products in its lineup. His third point: Cisco will leverage Duo's device visibility to expand endpoint management coverage.

Cisco: Late to 2FA?
Multifactor authentication is certainly a powerful tool for Cisco to have, but it's a little late for the company to have it, says Merritt Maxim, principal analyst serving security and risk professionals at Forrester.

"On one hand ... authentication continues to be one of the common vulnerabilities that gets exploited for data breaches," he explains. Compromised passwords continue to be a problem, and two-factor authentication is a good way to mitigate the risk.

Cisco has historically invested in network or cloud-focused companies; while Duo is "a little somewhat outside the core area," Maxim says, it does complement Cisco's portfolio. Duo is on a high-trajectory growth rate, he continues, and has raised a lot of capital.

However, the high price tag indicates Cisco may be "a little late to the game on this," Maxim adds, noting that most major tech companies have already invested in multifactor. If the company wanted two-factor authentication, it could have had it "ages ago." As a result, he anticipates the deal is about achieving customers and growth in addition to 2FA tech. Cisco wants to protect the networks and users connecting to the cloud; Duo is part of that.

Maxim doesn't anticipate any major changes to Duo's multifactor technology as a result of the acquisition. It's also intriguing, he points out, that Duo offers phishing simulation and awareness tools. Cisco could also potentially leverage these in its content strategy.

As for Cisco's plans, "we see Duo's opportunity with Cisco going beyond security into its intent-based networking strategy," Goeckeler said today. While more information on Duo's integration will be announced after the close of the deal, he noted plans to weave Duo's tech into Cisco products, as well as to continue to sell Duo's offerings as a standalone product.

The acquisition is subject to closing conditions and is expected to close in the first quarter of Cisco's 2019 fiscal year. Following the close, Duo's operations and 700-some employees will be integrated into Cisco's networking and security division under Goeckeler's leadership. Song will continue to lead Duo following the transaction, Cisco reports.

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