In a bid to expand its security portfolio, Cisco Systems CSCO recently announced its plans to acquire a cloud-based security company, OpenDNS, for $635 million.
Cisco expects the acquisition to close in the first quarter of next year, subject to customary closing conditions. OpenDNS will be incorporated into Cisco's security business group under the leadership of senior vice president and general manager, David Goeckeler.
San Francisco-based OpenDNS provides a cloud platform that offers online security solutions for both home and business users. OpenDNS’ services prevent computer attacks from particular Internet domains and encrypt web traffic to limit eavesdropping and other threats. Its services are easy to deploy and integrate and cater to more than 65 million customers across 160 countries.
The buyout will enhance Cisco’s current cloud security offerings by adding increased visibility and threat awareness of OpenDNS’ cloud delivered platform. The purchase will help the network equipment maker to broaden its efforts and meet the changing compliance and security needs.
The acquisition comes at a time when the Internet security market is evolving rapidly and Cisco is aligning its long-term growth strategy to capitalize on the “Internet of Everything” trend. As cloud computing and various mobile devices gain popularity, the need for secure networks for data transfer and related services also increases. Additionally, enterprise IT teams are facing great challenges to detect potential threats from these unmonitored and potentially unsecure entry points into the network, creating tremendous security risk.
Therefore, Cisco aims to target this endeavor by looking for integrated hardware/software/services solutions to deal with security threats.
Cisco Systems is the leading provider of IP-based networking services and other products. For several years, the company has been expanding its security portfolio through in-house development. It has also made several acquisitions such as Neohapsis, Virtuata, Sourcefire, Cognitive Security and ThreatGrid to bolster its offerings.
We believe that this acquisition will broaden Cisco’s customer base and security network offerings, providing it with a significant competitive edge.
Cisco currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Broadcom Corp. BRCM, Silver Spring Networks, Inc. SSNI and Jason Industries, Inc. JASN. All these stocks carry a Zacks Rank #2 (Buy).
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