Cisco will pay the premium because IronPort, the leading standalone provider in the e-mail messaging appliance market, was prepared to go public.
IronPort's machines preserve the integrity of e-mail by keeping out dangerous spam, worms, viruses and even spyware. Corporate compliance regulations requiring the preservation of e-mail and other computerized records have sparked a huge demand for such devices.
Gartner analyst Peter Firstbrook said Cisco picked the right "plum" in the market; IronPort lit up the industry with about $115 million in sales in 2006.
The purchase will give Cisco a solid platform on which to build security for its unified communications strategy, which includes convergence of instant messaging, VoIP and e-mail.
"Everybody buys anti-spam solutions, but if you can use the appliances for instant messaging security and eventually VoIP security, it's a big win for Cisco," Firstbrook said.
"This pits Cisco and Symantec in a pretty hot contest," Firstbrook said. "IronPort has been tearing the cover off of the ball in terms of sales. They're a really fast-growing company that is gaining market share."
The analyst said IronPort makes better products than the machines Symantec began offering after the Brightmail purchase. Symantec tried to poach IronPort's large enterprise customers by offering free appliances, but had a hard time succeeding because of IronPort's quality.
With IronPort, Cisco also opens up another avenue of competition with Microsoft (Quote), which has made big strides in the security software market.
The software giant rolled out its ForeFront security portfolio, cobbled together by several acquisitions.
Expect Cisco and Microsoft, with the help of partner Nortel, to compete mightily in the unified communications space. But to see this end goal through to fruition, Cisco must once again prove its mastery of integrating various product lines and talent.
Because of its dozens of acquisitions of large and small companies in the last several years, Cisco is good at incorporating new technologies.
Cisco chose IronPort from many in the market, including SonicWall, Secure Computing (which acquired CipherTrust last year), Sophos, Seagate, MiraPoint, SurfControl and Tumbleweed, Marshal, Clearswift and Proofpoint.
Firstbrook said he expects Proofpoint to be the next domino to fall, given the company's solid technology and blue-chip customer base.