Cisco Picks Up Protego

Cisco Systems Inc. (Nasdaq: CSCO) is ending 2004 in typical fashion -- by acquiring yet another security specialist. The company today announced a $65 million all-cash deal for Sunnyvale, Calif., startup Protego Networks.

Protego supplies security monitoring and threat management appliances to enterprises. The firms core offering is the PN-MARS family of appliances, which manage security across routers, switches, and firewalls as well as intrusion and detection devices.

With just 38 employees, the acquisition equals around $1.7 million per Protego staff member -- proof, if any were needed, that security is still big business.

Should we be surprised by the deal? Not really: Cisco has been flashing its cash throughout 2004, and it has been focusing particularly on security. Just last month, for example, the networking giant stumped up $16 million for another security management specialist, the Lilliputian Jahi Networks (see Cisco Jumps on Jahi).

The Jahi deal followed a spate of acquistions, including a $128.37 million deal for NetSolve Inc., $74 million for Perfigo Inc., $39 million for Riverhead Networks, and $5 million for Twingo Systems Inc. (see Cisco Nabs NetSolve and Cisco to Buy Perfigo for $74M and Cisco: It Takes Two to Twingo).Clearly, security is fast becoming an arms race among the major network vendors. However, whereas Cisco’s rival Juniper Networks Inc. (Nasdaq: JNPR) opted for a Big-Bang approach, forking out a whopping $4 billion to acquire NetScreen Technologies, Cisco remains on a mission to snap up smaller firms (see Juniper Attacks the Enterprise and Cisco's Security Spree Continues).

And we are likely to see more of the same, according to industry observers, as Cisco continues to plug its technology gaps and bolsters its Self-Defending Network initiative (see When Will Cisco Go Soft? and M&A Mojo).

In many ways, the writing was on the wall for a Cisco/Protego deal. The startup was founded back in 2002 by former Cisco execs Imin Lee and Partha Bhattacharya, who now serve as Protego CEO and CTO, respectively. Protego is also a member of Cisco's AVVID partner program, and the companies have already been working together to sell security products.

Back in August Protego also announced that former NetScreen president and CEO Robert Thomas had joined its board of directors, an indication of the company's M&A plans.

The deal is expected to close in the second quarter of Cisco's fiscal year 2005, which ends on January 29. Eventually, Protego will be integrated into Cisco’s Security Technology Group.— James Rogers, Site Editor, Next-Gen Data Center Forum