Cisco Systems, Inc. (CSCO), Sourcefire, Inc. (FIRE): Multiple New Acquisitions May Enhance This Company’s Position

Sourcefire to add more fire

Cisco is not sitting idle after acquiring JouleX. It has already announced its plans to acquire Sourcefire, Inc. (NASDAQ:FIRE). With the rumored purchase price of about $2.7 billion, the acquisition is going to be much bigger and more significant than JouleX. Sourcefire, Inc. (NASDAQ:FIRE) is a leading cyber security solutions provider and its stock has grown more than 5 times since its stock market debut in 2007.

While the markets are speculating about the hefty price premium paid by Cisco for acquiring Sourcefire, Inc. (NASDAQ:FIRE), intensive study reveals that the transaction is likely to provide a big bang for the buck. The deal will not only help Cisco in augmenting its network and internet security portfolio but will also help it gain access to lucrative corporate and government markets. Sourcefire, Inc. (NASDAQ:FIRE) has prominent position in the government security solutions segment.

At the very same time, there are concerns about integration of Sourcefire, Inc. (NASDAQ:FIRE) products with Cisco’s existing solutions. However, Cisco expects the acquisition to “accelerate delivery of Cisco’s security strategy of defending, discovering, and remediating the most critical threats.” It is also likely that the company will be able to stem erosion of its market share in the network security segment. It will also boost the company’s research potential as Cisco will be making key “acqui-hires” through the merger.

Is Cisco a good buy?

Cisco has maintained good growth trajectory and the stock has maintained an attractive rate of return. Apart from capital growth, Cisco also provides a dividend yield ratio of 2.67%, which qualifies it as a good investment pick for an income portfolio.

The company is in the maturity phase with stagnating growth; however management is working to counter the issue through a series of acquisitions. The new purchases will create new revenue streams and boost its research profile. Cisco is also expanding its international profile to counter slower growth rates in the domestic market. The company currently enjoys higher margins in the EMEA segment than in the US markets. Overall, Cisco is expected to provide high growth in the long run and is a good investment opportunity.

The article Multiple New Acquisitions May Enhance This Company’s Position originally appeared on Fool.com is written by Veeksha Rao.

Veeksha Rao P has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Sourcefire. Veeksha is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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