Cisco Buys Riverhead for $39 Million

After a four-year break, communications networking giant Cisco Systems (Nasdaq: CSCO) has bought another Israeli start-up.

Zuri Dar
Zuri Dar

After a four-year break, communications networking giant Cisco Systems (Nasdaq: CSCO) has bought another Israeli start-up.

Cisco announced yesterday that it will pay $39 million in cash for Riverhead Networks (formerly known as Wanwall).

The company was established in December 2000 by current CEO Yuval Rachmilevitz, Prof. Yehuda Afek, Dan Touitou and Anat Bremler-Barr. It develops security technology for Internet service providers and businesses to cope with extreme data overload conditions, in particular Distributed Denial of Service (DDoS) attacks and other security threats. The company has 44 employees in Tel Aviv and Cupertino, California.

Riverhead delivers an innovative solution that protects online operations from sophisticated attacks by detecting and blocking malicious traffic without harming legitimate business transactions, by comparing traffic flows to learned profiles of normal traffic patterns, behavior, and protocol compliance. Riverhead's technology can quickly and accurately identify and mitigate a broad range of known as well as previously unseen security attacks, such as large scale attacks by hackers.

Orna Berry, formerly the chief scientist of the Ministry of Industry and Trade, serves as Riverhead's chair. Riverhead will become part of Cisco's Internet Switching Business Unit. The deal is expected to close in the third quarter of 2004, and Israeli employees are expected to be transfered from the firm's Tel Aviv facilities to Cisco's development center in Netanya.

Cisco had previously invested $2 million in the firm, and will buy all the shares it does not hold already. A total of $15 million had been invested in Riverhead until now, which means that the $39 million will provide a tidy profit to the firm's investors, which include Sequoia Capital, Gemini Israel Venture Funds, Koor Venture Capital, and Intel Capital.

In 2000 Cisco bought four Israeli companies for over half a billion dollars, though it has avoided buying Israeli firms since.

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