Cisco to buy Sourcefire, more network security deals seen

Tue Jul 23, 2013 3:33pm EDT
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By Nicola Leske

(Reuters) - Cisco Systems Inc said on Tuesday it plans to purchase cybersecurity company Sourcefire Inc for $2.7 billion, a deal that analysts say should spark more acquisitions in the industry as large vendors seek to profit from growing demand for IT security.

Cisco, which has been seeking targets to boost its network security business, said it will pay $76 per share in cash for Sourcefire, a premium of 28.6 percent over its closing price on Monday of $59.08.

"We looked broadly at all the major players ... Sourcefire fit perfectly," Cisco's business development chief Hilton Romanski said in an interview.

Cisco has made it a priority to improve its security and is pushing to offer multiple security capabilities in hardware, software and cloud. Sourcefire is strong in intrusion detection and protection appliances, which is one of the higher growth segments within security.

Sourcefire shares rose 27.8 percent to $75.51 in afternoon trading while Cisco stock was down 0.3 percent at $25.64.

Analysts said the valuation may be high but the deal made sense for Cisco, which has lost market share in network security to small, innovative rivals such as Juniper Networks Inc, Check Point Software Technologies, and Palo Alto Networks Inc.

Cisco wants to be the top player in security and shed its reputation of lagging in that area, company security head Chris Young told analysts on a conference call.

"We will not rest until we are the number one security partner for our customers, hands down," Young said.   Continued...

A Cisco office is pictured in San Diego, California November 12, 2012. REUTERS/Mike Blake