Cisco eager to regain ground as network security leader

Mon Jan 14, 2013 12:58pm EST
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By Nicola Leske and Nadia Damouni

NEW YORK (Reuters) - After failing to land a big acquisition in the security space last year and suffering a steady decline in market share, Cisco Systems Chief Executive John Chambers is determined to turn around his company's lagging security business - whatever the cost.

The growing expectation, from Silicon Valley to Wall Street, is that Chambers will not be able to do it with its SecureX product range, and needs to go back to the deal table to boost the business with an acquisition in the coming months.

In December, Chambers said he had granted Chris Young - Cisco's first executive for security at a senior vice president level - a "blank check" for the next two to three years to hire and acquire as he sees fit to overhaul Cisco's security business and spark a rebound.

Cisco has lost around 10 percent of its market share in network security over the past five years to smaller, more innovative rivals such as Juniper Networks Inc, Checkpoint Systems Inc, and Palo Alto Networks Inc. The network equipment company fell behind in web applications, social media and video streaming that call for more complex security protection than traditional firewalls provide.

Mike Rothman, analyst and president at security research and advisory firm Securosis, said Cisco was "years behind in terms of a lot of capabilities" and that Young "better get his M&A people in order".

Cisco is aware of the deficiency and has been actively looking for acquisitions to beef up its network security offerings for some time, three sources familiar with the matter said.

However, there are only a handful of top picks - such as Palo Alto Networks, FireEye, Sourcefire, Fortinet and Barracuda Networks - and Cisco already struck out with at least one before Chambers' "blank check" strategy.

Cisco tried snapping up Palo Alto Networks before the company went public in July 2012, but they could not agree on a deal valuation, two of the sources said.   Continued...

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