Cisco Systems, Inc. (NASDAQ:CSCO) Banks On Its Security Business To Be The Next Big Thing


Cisco Systems, Inc. (NASDAQ:CSCO) is trying to pair its networking business with security for more growth, and great emphasis is currently being given to the security business. The company has figured out that acquisitions would enable it to accelerate growth on the security front, and that is what it wants to do. With more than $60 billion in cash and equivalents, Cisco has the war chest to tap strategic assets to bolster its security business agenda.

A time has come when Cisco Systems, Inc. (NASDAQ:CSCO) feels its needs to do things differently. The company has all along relied on the sale of networking gears, but it wants to expand into computer security as well. Cisco is looking for new growth opportunities, and security is a promising sector.

In the face of high-profile hackings, like the attacks on Target Corporation (NYSE:TGT) and Sony Corp (ADR) (NYSE:SNE), security has become a top priority in many companies. Cisco has seen a gap in the security space as well as opportunity to tap extra revenue dollars.

According to Cisco’s CFO, Kelly Kramer, the security market is currently fragmented and there is a need for consolidation. Cisco wants to be an agent of security industry consolidation, with the company focusing on acquisitions to grow its security business.

Notable security acquisitions

Already, Cisco Systems, Inc. (NASDAQ:CSCO) has made a number of security acquisitions, and the company wants to do more. In June, Cisco forked out $635 million for Internet security startup OpenDNS, after previously paying $2.7 billion for security vendor Sourcefire. These two stand out as Cisco’s most notable acquisitions so far, and the wheels will continue turning.

$60.4 billion war chest

However, Cisco will have to ready itself to pay sometimes lofty valuations for security assets. Kramer says that when it comes to making security acquisitions, Cisco will not shy away, because the company has the ability to do it. The company boasts a war chest of $60.4 billion in cash and equivalents, enough to tap key security assets.

Small and slow growth business

 Security is still a tiny fraction of Cisco Systems, Inc. (NASDAQ:CSCO)’s business and growth in that segment is also slow. The company tapped $464 million in revenue from the sale of security products in the latest quarter, which compared with $5 billion from the sale of networking equipment. Security revenue was up only 4% from the same quarter in the previous year.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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