Cisco To Pay $2.7 Billion For Cybersecurity Specialist Sourcefire

Cisco Tuesday revealed plans to acquire Sourcefire, a maker of intrusion-detection and intrusion-prevention systems, in a deal the networking giant said will significantly expand its threat protection portfolio.

Under the terms of the deal, Cisco will pay $76 per share for Sourcefire, or approximately $2.7 billion. Cisco said the acquisition has already been approved by each company's board of directors.

Columbia, Md.-based Sourcefire, founded in 2001, specializes in next-generation intrusion-prevention systems, firewalls and advanced malware protection. Sourcefire designs its products around a strategy called Agile Security, or the belief that network monitoring capabilities coupled with security intelligence can make enterprise networks more adaptable to changing threat landscapes, and more capable of detecting threats before they become a serious issue.

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Sourcefire completed its initial public offering in 2007 and has more than 650 employees worldwide. In 2012, the company reported a revenue of $223.1 million, which was up 35 percent year over year.

In April, Sourcefire named John Becker its new CEO, replacing company founder Martin Roesch, who had been serving as interim CEO since last June. Becker was previously the CEO of network monitoring software provider ScienceLogic.

Cisco, San Jose, Calif., said acquiring Sourcefire will arm it with a "deep security DNA," a skill set that's become increasingly important given the complexitie that mobility, cloud and the Internet of Everything have introduced into the IT security landscape.

"Cisco is committed to being our customers' leading security partner and to our aspirational goal to be the No. 1 security company," said Christopher Young, senior vice president, Cisco Security Group, on a conference call with investors Tuesday morning. "As our customers face an increasingly dynamic and treacherous threat landscape we are moving with increased focus to provide, in our view, the industry's more comprehensive, integrated security architecture to help them combat these challenges."

After the acquisition is completed during the second half of the year, Sourcefire employees will join the Cisco Security Group and be led by Young.

In a research note Tuesday, analyst and investment firm FBR Capital Markets said it expects the Cisco-Sourcefire deal to be one of several acquisitions in the networking and security markets taking place over the next year.

"We view this morning's news as 'game-changing' for the cybersecurity space as we expect a surge of consolidation to take place over the next 12 to 18 months on the heels of strong secular trends, massive cyberthreats, and as larger technology vendors look to become bigger players in this fertile segment of the tech food chain," the firm wrote.