Updated: University of Michigan spinoff Arbor Networks sold to Tektronix Communications in major IT security deal
A Texas-based network security service provider and product manufacturer has reached an agreement to acquire Arbor Networks, an information technology security firm founded 10 years ago by a University of Michigan professor and doctoral student.
Arbor Networks, which has been gradually adding workers to its research-and-development operation in Ann Arbor, will be sold to Plano, Texas-based Tektronix Communications, a subsidiary of $12.2 billion Washington, D.C.-based conglomerate Danaher Corp. (NYSE: DHR), the companies announced today.
Arbor Networks, founded by U-M engineering professor Farnam Jahanian and then-doctoral student Rob Malan in 2000, is a major source of network security services. The company, whose security software monitors traffic on more than
70 percent of the world's Internet service providers, is based in
The firm, which has more than 90 employees in Ann Arbor, signed a 7-year lease for a 22,000-square-foot office at the South State Commons complex in Ann Arbor two years ago.
Tektronix plans to maintain Arbor's existing locations and 275 employees nationwide, said Malan, Arbor's chief technology officer.
"Arbor's going to be coming in as a standalone company," Malan told AnnArbor.com this afternoon. "Things don't hardly change at all from an Arbor perspective. One of the things they loved about Arbor was the fact that we were such a strong brand and had such a strong customer base with great teams."
Terms of the deal were not immediately available. It's expected to be finalized in September.
"Arbor Networks is ideally positioned to continue on its growth path by protecting the availability of networks and services around the world as the size, complexity and frequency of network security threats continues to grow," Rich McBee, Danaher group executive, said in a statement. "Arbor Networks expands our portfolio of leading companies in the communications and enterprise markets."
Company officials say the acquisition will give Arbor the financial strength to continue its growth.
"The Ann Arbor site will continue to be the focal point for Internet
security R&D, and the company will continue to be a positive force
for regional economic growth," Jahanian said in an e-mail.
Arbor Networks officials said in January 2008 that the company would add 56 jobs over the next few years to its Ann Arbor operation.
That expansion was tied to a $193,200 tax abatement distributed by the city of Ann Arbor and a 10-year, $1.5 million tax credit awarded to the company by the Michigan Economic Development Corp.'s Michigan Economic Growth Authority board.
"We're hiring aggressively now," Malan said. "We've been hiring aggressively for quite a while. It doesn't look to stop."
Malan declined to discuss whether there were other bidders for the company but said he was "very psyched" about the transaction.
"We've been growing really strong for the last three years pretty much
and we've been able to grow from local talent as well as bring
international and national talent here to Ann Arbor," he said. "Absolutely they see Ann Arbor and our ties to the university as a huge positive. And they see this as a security center of excellence for the company."
Arbor's existing leadership, including Malan and CEO Colin Doherty, is expected to stay in place.
"This is a great fit for Arbor Networks employees and our customers," Doherty said in a statement. "Tektronix Communications has significant presence in the global carrier market, a worldwide support infrastructure and a strong financial position. This should help Arbor accelerate the delivery of infrastructure security solutions that are critical to the success of converged carrier network operators and next-generation data centers."
Jahanian, Arbor's chairman and chairman of the Department of Computer Science Engineering at U-M's College of Engineering, said the company's talented employees were "ultimately responsible for the seismic shift in the Internet security landscape, in a very challenging economic climate and ever-changing competitive landscape."
"I am particularly proud of the University and
Arbor's role in economic development and job growth," he added.
Dug Song, a serial entrepreneur in Ann Arbor who served as Arbor's security architect from 2000 to 2007, told AnnArbor.com that Arbor survived the "telecom nuclear winter" of the early 2000's by rapidly innovating.
"The honest truth is just like any startup, one competitive advantage that Arbor really had was a bunch of top-notch hackers that could iterate really quickly," said Song, who is now leading a recent startup mobile software firm called Scio Security, which has closed a seed round of financing. "We learned very, very fast and we simply outpaced all our competitors."
Arbor, spawned by U-M's software systems lab, is "a wonderful example of how the innovation economy can work when universities, government and entrepreneurs align behind great ideas and great technology,” Jahanian said in May in U-M's University Record publication. “The technology transfer program here was a highly effective link in facilitating the commercialization of technology for Arbor, demonstrating clearly how federally funded university research can result in a powerful engine for economic growth.”
Arbor Networks got venture capital funding in its early days from global investment firm Battery Ventures and tech giant Cisco Systems. Its later investors included Ann Arbor-based EDF Ventures, which is still celebrating the recent sales of data storage firm Greenplum and U-M spinoff HandyLab.
The Tektronix deal marks the third consecutive year in which a U-M startup company with a local presence has enjoyed a major acquisition. The U-M Tech Transfer Office has an equity stake in Arbor Networks, ownership that will transfer into cash flow to be reinvested in research at the university.
In 2008, U-M health care software startup HealthMedia was sold to Johnson & Johnson, and in 2009 medical devices startup HandyLab was sold for $275 million to Becton, Dickinson and Co. Both companies have maintained their local operations.
"Sometimes it takes a dozen years to really have things develop," said Ken Nisbet, executive director of U-M's Tech Transfer Office. "That’s just the nature of the beast. We’re seeing some of those early seeds develop into nice growth. Having these companie come in and acquire our startups -- assuming they continue to grow here, which it seems like they are -- it’s a really good thing for our region and our state."