Cisco to buy OpenDNS for $823m

Cisco Systems will buy cloud security firm OpenDNS for US$635 million (A$823.5 million) as its latest effort to boost its security business.

Cisco has of late bought a number of security companies, which has made its relatively tiny security business one of its fastest growing areas in the past two years.

OpenDNS uses predictive intelligence to block malware, botnets and phishing threats that antivirus and firewalls miss. Cisco was a minority investor in the privately-held firm and one of the backers that invested US$35 million in OpenDNS in May last year.

When Cisco buys stakes in startups, it often receives defensive rights that give it an edge to acquire companies it has invested in ahead of competitors.

The acquisition of OpenDNS is Cisco's first after it said in May that veteran sales executive Chuck Robbins would replace John Chambers as CEO in July.

"M&A will continue to be an important part of what we do," Hilton Romanski, Cisco's chief technology and strategy officer said.

The company, whose security business is known for its firewalls, expanded into intrusion detection and prevention systems with its US$2.7 billion acquisition of Sourcefire in 2013.

"We're going to continue to focus on deals that allow us to complement what we've done with Sourcefire in the area of intrusion prevention and we'll continue to look at malware and other key verticals inside the security domain," Romanski said.

The global cybersecurity market is estimated to grow to US$170.21 billion by 2020 from US$106.32 billion in 2015, according to market research firm MarketsandMarkets.

Cisco's shares closed down 8 cents or 0.3 percent following the announcement.

Cisco is transitioning towards high-end switches and routers and investing in new products such as data analytics software and cloud-based tools for data centres.

It bought malware analysis company ThreatGRID in 2014 and security advisory firm Neohapsis this year.

OpenDNS has partnerships with network gear makers such as Aruba Networks and Netgear as well as cybersecurity companies such as FireEye.

The acquisition is expected to close in the first quarter of fiscal year 2016, Cisco said in a statement.