ANN ARBOR – In the biggest tech exit in Michigan history, networking giant Cisco announced Thursday it will buy Ann Arbor-based Duo Security for $2.35 billion in cash and stock. The deal is expected to close by the end of Cisco’s fiscal 2019.

Duo is an authentication service that focuses on two-factor authorization, helping to identify a company’s employees across a range of devices or applications.

The company was founded in 2010 by Dug Song and Jonathan Oberheide and went on to raise $121 million through several rounds of funding. The company has 700 employees with offices throughout the United States and in London. Last October, Duo had a $1 billion valuation, marking only the second Venture Capital-backed company in Michigan to achieve this milestone, becoming what the tech industry calls a unicorn.

Dug Song, CEO, Co-Founder, Duo Security

The last tech company to be valued at $1 billion in Michigan was Esperion Therapeutics, when it was sold in 2004 to Pfizer for $1.3 billion. Esperion developed the statin drug known as Lipitor used to battle cardiovascular disease. After the sale, many of the founding executives went on to create new startups, become angel investors, and major players in the Michigan technology sector.

Song will continue leading Duo as its General Manager and will join Cisco’s Networking and Security business led by EVP and GM David Goeckeler. Cisco in a statement said they value Michigan’s “resources, rich talent pool, and infrastructure,” and remain committed to Duo’s investment and presence in Michigan.

In a letter to employees, Song said: This agreement begins an exciting new chapter for Duo. With this deal, we will realize significant value for our shareholders, while gaining the opportunity to leverage Cisco’s global scale & resources to democratize security faster without compromising our vision.

He added: “Cisco is not only the world’s largest networking company, but also the world’s leading enterprise security business. They agree with us on the past state of security, and we’re going to fix it together. They’ve had a long and successful history of acquiring companies to support and accelerate their strategic initiatives.

“Until the deal closes,” Sung wrote, “we will continue to operate as separate companies. Let us all remain focused on executing our 2018 strategic plan and delivering our customers the unmatched products and experience they have come to expect from us.”

Song said Duo “wanted to make security easy & effective, and we’ve done that by building the right kind of company to do so. We design and deliver security that gets out of your way and just works, versus an industry full of impractical ideas and frustrating experiences. Our industry-leading measure of customer satisfaction (70+ Net Promoter Score – NPS) is a testament to our relentless focus on customers, and solving for their needs.”

Song said as a new business unit within Cisco, Duo will benefit from being part of a larger organization with established go-to-market reach, scale, and partnerships.

“We will also have support and resources as part of Cisco to accelerate our strategy. I view this as an exciting opportunity to continue to innovate and invest in the future, and will continue to lead as Duo’s new General Manager, rather than its CEO (which is great – General Dug has a nice ring to it).”

He added: “This is an important next chapter for Duo and there is much more we can accomplish together to position Cisco for enduring success. I am incredibly proud of the company we have built and look forward to our future with our friends at Cisco.”

Duo is Cisco’s biggest acquisition since the $3.7 billion deal for application management company AppDynamics in early 2017 and continues CEO Chuck Robbins‘ string of moves to push the company deeper into software. In October, Cisco agreed buy BroadSoft, a developer of call center technology, for $1.9 billion.

Providing security services to its existing customer base is one of Cisco’s biggest efforts. In the latest earnings call, Robbins called security “foundational to everything we do.”