Cisco Picks Up Cybersecurity Specialist Sourcefire for $2.7 Billion

Cisco Systems (CSCO) jumped further into cybersecurity July 23 with the $2.7 billion purchase of Sourcefire (FIRE), a $223 million provider of continuous awareness intrusion prevention systems.

Don't be surprised if Cisco's leap spurs a consolidation wave of cybersecurity-related acqusitions, as large IT companies see more open opportunities in the segment.

The boards of both companies have approved the acquisition. The $2.7 billion purchase price for Sourcefire amounts to $76 per share in cash or a hefty 29 percent premium over the cybersecurity’s $59.08 per share price at the close of trading on July 22. The purchase price includes key employee retention-based incentives.

The 12-year old Sourcefire has been publicly held since 2007 and employs some 650 people worldwide.

Sourcefire is Cisco’s seventh acquisition in 2013, the largest in dollar value since the networking giant bought NDS in March 2012 for $5 billion, and its second security-related purchase this year. In late January, the vendor bought Cognitive Security, a Prague-based, privately held network security and artificial intelligence vendor.

Cisco has zeroed in on improving its security lineup of late, wanting to shore up its position and diversify its portfolio of offerings. With Sourcefire’s strength in integrated, continuous threat protection—one of the segment’s hottest growth areas—Cisco saw an opportunity to fend off smaller competitors such as Fortinet (FTNT), Palo Alto Networks (PANW), Juniper Networks (JNPR) and others.

"‘Buy' has always been a key part of our build-buy-partner innovation strategy," said Hilton Romanski, Cisco corporate development vice president, in a statement. "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 cybersecurity and threat defense, we have a unique opportunity to deliver the most comprehensive approach to security in the market."

Martin Roesch, Sourcefire founder and chief technology officer, said Cisco will provide the cybersecurity specialist with an expanded global sales reach. And, Cisco has agreed, he said, to support Sourcefire’s “pace of innovation in both commercial markets and the open source community."

The acquisition is expected to close before the end of the calendar year, and at that point, Sourcefire will be folded into Cisco’s Security Group, headed by Christopher Young, Cisco Security and Government Group senior vice president. Until that time, the two companies will continue to operate separately.

“Sourcefire’s open source model is expected to strengthen and accelerate Cisco’s ability to build a strong ecosystem of security partners who can bring real time threat intelligence and innovations to customers through integration with our technologies and platforms,” Young wrote in a blog post.

He said the Sourcefire and the earlier Cognitive Security acquisition “are expected to help Cisco achieve our goal as we offer more best-in-class security services, more intelligence sources for continuous protection, and an open platform to enable a threat-aware network.”