Cisco Buys Duo Security for $2.35 Billion

Cisco has agreed to buy Duo Security, a 700-person strong cybersecurity startup based in Ann Arbor, Mich., for $ 2.35 billion in a combination of cash and stock.

Duo sells tools that help businesses secure online accounts for their employees, such as two-factor authentication and single-sign on services. Facebook’s outgoing security chief, Alex Stamos, once described it has his favorite product made by an information security company.

“This acquisition is going to enable us to allow customers to securely connect any user on any device to any application over any network,” David Goeckeler, an executive vice president and general manager of security at Cisco, told Fortune on a call. “It’s just that simple.”

Cisco was interested in purchasing Duo in part to boost its security unit, which grew at a fast clip of about 11%—about three times more than its overall business—in the company’s fiscal third quarter. The acquisition will also help Cisco along as it transitions from a focus on hardware sales of networking gear, like routers and switches, to software subscriptions.

“We’ve been talking at Cisco for a while about moving more into a software and recurring revenue model,” Goeckeler said. “This is right in that slipstream.”

Dug Song, Duo’s CEO and founder, told Fortune that the deal would enable Duo to vastly expand its access to prospective customers. “Cisco basically reaches everybody…they are the network,” said Song, who is set to stay on as general manager of Duo within Cisco.

This is Cisco’s biggest acquisition since it swooped in and scooped up AppDynamics, a firm that monitors and manages app performance, for $ 3.7 billion in early 2017. In Oct. 2017, Cisco bought Broadsoft, a call center tech company, for $ 1.9 billion.

Cisco has a long history of buying security startups. Some of its acquisitions in recent years include Sourcefire, an intrusion detection tech firm (2013); Threatgrid, a malware analyzing firm (2014); OpenDNS, a domain name service provider (2015) and Lancope, a network monitor (2015).

Duo was last privately valued at $ 1.17 billion after a $ 70 million financing round in October. Cisco participated as an investor in that round.

Cisco said the acquisition is expected to close, pending regulatory approval, in the next three months.