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Cylance Secure

Orange County’s business community has seen its share of job cuts, C-suite departures and corporate relocations the past few years, much of them in the wake of mega-deals involving some of the area’s biggest names, including Broadcom Inc., Microsemi Corp., and Allergan PLC.

Don’t expect more of the same with Cylance Inc. once BlackBerry Ltd. completes its $1.4 billion takeover of the high-flying Irvine-based firm, whose software combines machine learning, artificial intelligence algorithms and the cloud to thwart new and evolving computer threats and cyberattacks before they hit servers, desktops and virtual desktops.

In fact, the 6-year-old company’s presence and headcount in Orange County is likely to increase once the deal gets done in the next few weeks, according to co-founder and Chief Executive Stuart McClure.

“They’re giving us autonomy,” McClure told the Business Journal in his first sit down interview since the BlackBerry deal was announced Nov. 16.

“I’m sure there will be some changes but I don’t foresee them being drastic ones.”

That expected stability extends to Cylance’s executive team.

McClure, who co-founded Cylance in 2012, said he expects to stay with the company, along with the company’s top management.

His role hasn’t been announced, but he expects to remain in charge of Cylance’s operations.

He declined to disclose his financial stake in Cylance prior to the acquisition, or if he’ll be a large shareholder of BlackBerry (NYSE: BB) going forward.

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Cylance will operate as a wholly-owned subsidiary of the Canadian company once the deal is closed. It’s also likely to maintain its brand, one of the most respected in the cybersecurity market.

Cylance products are used to protect more than 15 million internet-capable computer hardware devices for more than 3,500 corporate subscribers, including Dell, Gap Inc. and Panasonic Corp.

The fast-growing company has nearly 400 employees in Orange County.

That’s among the five largest local software makers ranked by employment, according to Business Journal research.

Most of its local operations are based in the company’s 134,000-square-foot headquarters at the 400 Spectrum Center tower, which bears its name at the top of the building.

McClure’s perspective from OC’s tallest office gives him a bird’s-eye view of other area tech giants that have seen cutbacks in local headcount. Broadcom’s new Irvine campus about a mile away was once envisioned to hold more than 3,000 employees, but now has only about half that number after its $37 billion sale in 2016 to Avago Technologies.

Cylance continues to push forward on hiring. Its website lists nearly 30 open positions in Irvine, and 65 overall.

The Irvine office handles traditional corporate functions, such as marketing and administrative work, as well as product development—most of the open local positions are engineering related.

The company occupies six floors of the 21-story tower near the Irvine Spectrum Center mall, with room for expansion.

“We have room on two or three floors to grow,” McClure said.

Its worldwide employment count has surged to nearly 1,000, with a recent push into Western Europe, particularly France, Spain, Italy and Portugal.

The expansion opens up new markets to introduce its developing consumer product line. Cylance Smart Antivirus, released in July, costs $29 per year for a single computer and $99 for up to 10 computers on a family plan.

“That’s really blown up and taken off internationally,” McClure said.

The plug-and-play software provides predictive security that tracks and blocks threats before they damage device performance or disrupt the user.

It’s geared to combat the 350,000 pieces of malware created every day, a number that traditional antivirus software can’t defend against, according to Cylance.

The Business Journal in mid-2017 first reported that the company was entering the consumer market by making its flagship corporate offering Cylance Protect available to thousands of consumers in its extended network.

Its business customers were able to license the product for employees, setting a foundation for Cylance’s next level of growth taking on the likes of Norton Antivirus and McAfee.

Its technology has tackled execution-based attacks, which include viruses, worms and nation-state intrusions.

The company is now trying to stop identity-based attacks, the second highest cause of breaches.

“We’ve largely solved the execution-based problem,” McClure said. “We’re actually applying the same AI learning into identity, which is coming soon. It’s going to be a big one for us.”

Finish Line

The sale to BlackBerry is a vindication of the strategy employed by McClure, a 1991 graduate of the University of Colorado with a bachelor’s degree in psychology, philosophy and a computer science emphasis.

In 1999, he co-founded Foundstone, a security consultancy, taking it to $22 million in sales before it was acquired in 2004 for $86 million by McAfee. McClure spent the next several years at McAfee, including as a member of its executive management team where among other roles, he led an emergency response team and was responsible for corporate security product lines.

In the late 1990s, McClure, then an analyst at InfoWorld, co-wrote a popular tech book called “Hacking Exposed,” which advised companies on how to break into their own computer systems to discover vulnerabilities in their networks.

“One of the most successful security books ever written,” McAfee Chief Executive Dave DeWalt wrote in a foreword in a later edition.

McClure himself at the time wasn’t happy with the state of computer security. In speeches, he would note that cybersecurity was reactive and thus too late. He and Ryan Permeh, who was the chief scientist at McAfee, saw the advantages of using artificial intelligence to predict possible attacks and launched Cylance.

BlackBerry’s purchase of Cylance represents a multiple about 11 times higher than Cylance’s last fiscal-year revenue of $130 million.

The deal crossed a big hurdle about a month ago when the transaction passed the mandated waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, signaling it won’t face objections via U.S. antitrust law.

Since BlackBerry is a Canadian company based in Waterloo, the deal shifts to the purview of the Committee on Foreign Investment in the United States, or CFIUS, an interagency committee which reviews some foreign transactions involving U.S. companies.

In recent years, some OC companies have faced government scrutiny, particularly when Broadcom was sold in early 2016 to Singapore-based Avago, and Ingram Micro sold for $6 billion late that year to China’s HNA Group Co.

Game Plan

BlackBerry, which over the years has shifted from the smartphones once loved by politicos and business executives towards cybersecurity, had no prior relationship with Cylance before its corporate development team reached out only a few months before securing a deal.

Cylance was content in its own lane and wasn’t looking for a partner, or an exit, according to McClure.

“It was never our game plan,” he said.

“Our game plan was to achieve the mission. The mission was to protect all users’ computers and all things under the sun.”

Consider the mission unaccomplished at this point.

“It’s not a finish line mission,” McClure said. “We knew it would take rapid growth, rapid acceleration of the company.”

“When an opportunity came with BlackBerry, it just made a ton of sense.”

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