BlackBerry To Buy AI Based Cybersecurity Startup Cylance For $1.4B

Blackberry has agreed to purchase next-generation cybersecurity startup Cylance for $1.4 billion to better predict and prevent known and unknown threats to endpoints.

The Waterloo, Ontario-based technology vendor said its proposed acquisition of Irvine, Calif.-based Cylance will provide access to a pioneer in applying artificial intelligence, algorithmic science, and machine learning to cybersecurity scenarios. Cylance's advanced and lightweight agent resides on the endpoint, operates both online and off, and requires very little memory and power to function.

"Cylance's leadership in artificial intelligence and cybersecurity will immediately complement our entire portfolio," John Chen, BlackBerry executive chairman and CEO, said in a statement. "We believe adding Cylance's capabilities to our trusted advantages in privacy, security mobility, and embedded systems will make BlackBerry Spark indispensable to realizing the Enterprise of Things."

[Related: Cylance Adds $120M In Funding To Drive Foreign Expansion, Extend Breadth Of Offerings]

Cylance was founded in 2012 and has more than 3,500 active enterprise customers, including over 20 percent of the Fortune 500. The company has 900 employees and has raised $297 million in five rounds of outside funding, including a $120 million Series E round in June led by Blackstone Tactical Opportunities.

"Our highly skilled cybersecurity workforce and market leadership in next-generation endpoint solutions will be a perfect fit within BlackBerry," Stuart McClure, Cylance's co-founder, chairman and CEO, said in a statement. "We are eager to leverage BlackBerry's mobility and security strengths to adapt our advanced AI technology to deliver a single platform."

The deal is expected to close prior to the February 2019 end of BlackBerry's current fiscal year, and includes $1.4 billion in cash plus the assumption of unvested employee incentive awards. BlackBerry's stock is up $0.04 (0.45%) to $8.90 in pre-market trading Friday.

Cylance is expected to operate as a separate business unit with BlackBerry once the deal closes, with McClure continuing to lead Cylance and reporting directly into Chen, according to the company. The company's technology will strengthen BlackBerry Spark, a chip-to-edge communications platform for the Enterprise of Things that will create and leverage trusted connections between any endpoint.

BlackBerry Spark enables organizations to comply with stringent multi-national regulatory requirements, and leverages 256-bit encryption to ensure that data is always protected.

Cylance's artificial intelligence offering predicts and protects against both known and unknown threats, and has been deployed in more than 15 million endpoints, according to the company. The tool is capable of identifying threats and analyzing them some 25 months - on average - before they appear in the wild, SE Labs found.

Buying Cylance will add more than 300 software engineers and data scientists and 100 patents in cybersecurity and machine learning to BlackBerry's base of 3,200 employees and more than 37,500 patents. Notable Cylance customers include Panasonic, Intermedia, the Boy Scouts of America, and BJ's.

The two companies have an efficient and complementary go-to-market channel across multiple industry verticals and enterprise sizes, according to BlackBerry. The deal will also expand BlackBerry's total addressable market to include the $11 billion, high-growth endpoint security space, the company said.

Cylance in January announced that it had hit the $100 million revenue mark just 39 months after the first shipment of its flagship product. This made Cylance one of the fastest-growing security companies in history, according to the company, even surpassing the rapid rise of companies like Palo Alto Networks, FireEye and Okta.

Next-generation endpoint security vendors have attracted a lot of outside investment as they take market share away from legacy players in the space. In 2018 alone, Carbon Black went public in a $152 million offering, while Tanium has received $375 million of outside funding and CrowdStrike has gotten $200 million of outside funding.