Cisco Spreads in the Network Security Space
Revenues from the security segment remain constant YoY
As you can see in the chart below, Cisco’s (CSCO) revenues in its security segment rose from $365 million in fiscal 1Q14 to $455 million in fiscal 1Q15 and $485 million in fiscal 1Q16. While revenues rose 24.6% YoY (year-over-year) in 1Q15, they rose 6.6% YoY in 2Q15. In terms of total revenues, the security segment comprised 3% of total revenues in 1Q14 and 4% of total revenues in both 1Q15 and 1Q16.
Cisco to complete a series of acquisitions in 2Q16
The firm has invested heavily in growing organically and through acquisitions. It’s one of the leading players in the cybersecurity market, with over 5,000 employees in this segment. Cisco has relied on a number of acquisitions to raise market share. During 1Q15, the company agreed to acquire Lancope, OpenDNS, Pawaa Software, and Portcullis to boost its security business. All the acquisitions are expected to close in fiscal 2Q16. Cisco is looking to build a “best-of-breed” portfolio to cater to all sectors of the industry.
The company focuses on building products that are effective against known and emerging threats. Cisco has stated the need to build an integrated architecture to offer a “portfolio of solutions” to customers.
Other potential acquisitions in this market
FireEye (FEYE), one of the fastest growing companies in the cybersecurity space, is looking for potential acquisitions to help it build and diversify its portfolio. Other companies, including Symantec (SYMC) and tech heavyweight IBM (IBM), are also looking to acquire companies in the high-growth cyberspace so they can enhance their service offerings. IBM is competing with FireEye to acquire CyberArk (CYBR), a company that has shown strong year-over-year growth in revenues, to expand its position in the privileged access management segment. Palo Alto Networks (PANW), a market leader in the cybersecurity space, is looking for low-cost acquisitions such as Cyvera in the range of $200 million.
IBM constitutes 3.5% of the iShares US Tech ETF (IYW).
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