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Cisco Announces $2.7 Billion Acquisition of Sourcefire

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Cisco Systems, Inc. (NASDAQ:CSCO) announced today that it will buy rival Sourcefire, Inc. (NASDAQ:FIRE) at $76 per share, approximately $2.7 billion. The deal has been approved by each companies’ board of directors and is expected to be completed before the end of the year.

Cisco Announces $2.7 Billion Acquisition of Sourcefire

“Sourcefire aligns well with Cisco’s future vision for security and supports the key pillars of our security strategy. Through our shared view of the critical role the network must play in cyber security and threat defense, we have a unique opportunity to deliver the most comprehensive approach to security in the market,” said Cisco vice president Hilton Romanski.

Cisco System eliminating competition

Cisco Systems, Inc. (NASDAQ:CSCO) has long been one of the world’s leading IT infrastructure firms, but it has lost market share in recent years in the security market as smaller, nimbler firms have adapted more quickly to a rapidly changing security landscape where the cloud, mobile computing, and increased connectivity has dramatically changed both corporate and individual threat profiles. The acquisition of Sourcefire, Inc. (NASDAQ:FIRE) eliminates one of those competitors and should reinforce Cisco’s position in the market.

“‘Buy’ has always been a key part of our build-buy-partner innovation strategy,” said Romanski.

Purchase is expected to reinvigorate Cisco’s security team.

BMO Capital supports the decision

A report from BMO Capital Markets supports the decision, saying that it expects Cisco Systems, Inc. (NASDAQ:CSCO) to outperform over the course of this year.

Sourcefire is a leading provider of security solutions, including next-generation firewalls, intrusion prevention, and advanced malware protection,” the report says. “We are positive on the acquisition as it is accretive to both growth and gross margins, and could spark renewed growth in Cisco’s Security segment.”

“The notion of the ‘perimeter’ no longer exists and today’s sophisticated threats are able to circumvent traditional, disparate security products. Organizations require continuous and pervasive advanced threat protection that addresses each phase of the attack continuum,” said Christopher Young, senior vice president, Cisco Security Group.

Cisco Systems, Inc. (NASDAQ:CSCO) expects the acquisition to dilute non-GAAP earnings for FY 2014 due to normal integration and accounting costs. The two companies will operate separately until the deal is complete. Sourcefire, Inc. (NASDAQ:FIRE) personnel will become part of the Cisco Security Group. “With the acquisition of Sourcefire, we believe our customers will benefit from one of the industry’s most comprehensive, integrated security solutions,” said Young.

Sourcefire was founded in 2001 and went public in 2007. It reported $223.1 million in revenue for 2012, a 35 percent year-on-year increase. The Columbia, Maryland-based company currently has 650 employees.

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