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Cisco Systems, Inc. (CSCO) Finally Makes a Smart Deal Again

Cisco Systems, Inc. (NASDAQ:CSCO)It looks like Cisco Systems, Inc. (NASDAQ:CSCO) is getting back into the growth-by-acquisition game again.

The networking giant famously promised to slim down in 2011. Cisco had become too bulky, too complicated, and too inefficient after swallowing scores of consumer-oriented companies, and a serious diet was in order. The company has killed off or sold most of its consumer-grade product lines, including the Linksys network router division and the Flip video camera business.

The company never really stopped making small tuck-in acquisitions, but the deals moved over to the enterprise-focused side of things. Two billion-dollar buyouts made waves in 2012, but not always in a good way.

Today, Cisco Systems, Inc. (NASDAQ:CSCO) got back to basics with a buyout that’s squarely in the company’s wheelhouse. This time Cisco is spending $2.7 billionthe target was network security specialist Sourcefire, Inc. (NASDAQ:FIRE) . The offer is about 28% higher than last night’s closing price for Sourcefire shares, and the company is going out at an all-time high. Including the buyout premium, Sourcefire, Inc. (NASDAQ:FIRE) investors have enjoyed a 65% return over the last year.

That’s an impressive gain for a small-cap niche specialist — but do you know who’s almost keeping pace with Sourcefire’s climb?

That’s right: Cisco itself has soared 60% in 52 weeks, utterly crushing its peers on the Dow Jones Industrial Average (INDEXDJX:.DJI), although it dipped on the Sourcefire, Inc. (NASDAQ:FIRE) news and still remains slightly below the Dow’s average gain today.

CSCO ChartCSCO data by YCharts.

So what does this deal mean for investors in the networking sector? Well, not much unless you’re betting on Sourcefire, Inc. (NASDAQ:FIRE) or Cisco Systems, Inc. (NASDAQ:CSCO).

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