That's basically in line with the valuation Cisco paid for AppDynamics, which operates in a different market from Duo but shares the financial profile of a fast-growing SaaS startup of scale. Cisco has used its M&A program to increase its recurring software revenue, which is highly prized on Wall Street, as opposed to its legacy networking hardware products.Īssuming our revenue estimate for Duo is roughly correct, Cisco is valuing the IAM specialist at 19x trailing sales. We would also note the fact that the startup is entirely subscription-based and runs at roughly 90% gross margins, which was undoubtedly another reason why Cisco paid up for the company. Workday ended up investing in that round, joining early investor Google Ventures as the only corporate money in Duo, which raised a total of nearly $120m.Īccording to our understanding, Duo put up about $125m in trailing sales. Several market sources have indicated that as Duo was raising the round, which was announced last October, both Cisco and Workday were considering an outright purchase of the IAM startup. Cisco has now purchased 14 infosec companies since the start of the decade, making it the most-active buyer in the sector in recent years, according to 451 Research's M&A KnowledgeBase (The pickup of Duo bumped Cisco ahead of Symantec, which has been out of the market since November, partly because of its still-ongoing look into its accounting practices).Ĭisco is paying a rich valuation to take out Duo, which achieved unicorn status in its most-recent funding. Duo's sale marks the second acquisition in recent weeks of a vendor focused on the nascent zero-trust networking concept, following Okta's pickup of SDP provider ScaleFT, and it could be viewed as a shot across the bow of other network security specialists – which could spark a wave of zero-trust-related M&A as the rest of the pack look to avoid falling too far behind.Īnnouncing its second-largest information security (infosec) deal, Cisco says it will pay $2.4bn for Duo Security, adding identity and access management (IAM) to the networking giant's ever-expanding security portfolio. In combination with other security purchases such as OpenDNS and CloudLock, Cisco instantly becomes one of the leading contenders in the overall cloud security market by effectively combining identity as a service (IDaaS) with cloud access security brokerage (CASB). Although the price was steep, the logic for Cisco is clear, as the erosion of the network perimeter – thanks largely to mobile and cloud computing – as well as the emergence of zero trust and software-defined perimeter (SDP) posed existential threats to Cisco's VPN, firewall and potentially network access control (NAC) businesses. With its valuation rising by the day, an IPO was becoming a more likely outcome for Duo until Cisco reached for it.
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