Cisco Systems, Inc. (CSCO), Sourcefire, Inc. (FIRE), Radware Ltd. (RDWR): Tech Giant Bulking Up For Cyber War

Sales have grown steadily over the last ten years, but were flat year over year in the first and second quarters. More concerning, earnings were down about 35% or so year over year in each quarter, too.

The weak first quarter caused the stock to sell notably lower, a drop from which it has yet to recover. That could make now a good time for a buyer to step in. More aggressive investors, meanwhile, might also find now a compelling time to look at the shares since cyber defense spending is only going to increase from here.

Fortinet Inc (NASDAQ:FTNT) provides an all-in-one cyber protection system called FortiGate, along with a collection of management tools that support the product. FortiGate provides firewall, virtual private network, antivirus, intrusion prevention, web filtering, and antispam tools, among others.

The company’s top line was up year over year in the first quarter, but like the other two cyber specialists here was sequentially lower in the first quarter. The shares sold off after it reported results and have yet to fully recover. Second quarter earnings, meanwhile, were lower by a third. Like Radware, this weak spell could make now a good time for investors or an acquirer to step in.

Buying Protection

The cyber protection industry is only just heating up. The Sourcefire deal could be the start of an acquisition binge by larger players looking to bulk up fast in a hot sector. Based on the all cash deal, investors should sell Sourcefire shares to lock in gains.

Fortinet is about twice the size of Sourcefire, so an acquisition would be that much more expensive. Still, its products and customer base would make a nice addition to an industry giant trying to bulk up. Radware, a much smaller player than the other two, would be an easier target. And both have plenty of potential as stand alone entities once their businesses solidify.

The article Tech Giant Bulking Up For Cyber War originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Sourcefire. Reuben 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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