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Networking equipment maker, Cisco Systems Inc. (CSCO - Analyst Report), recently completed the acquisition of cyber security firm, Sourcefire, Inc. , for $2.7 billion. The company paid $76 per share in cash for Sourcefire.

Columbia, Maryland-based Sourcefire was founded by Martin Roesch in 2001. It develops hardware and software for network security, including next-generation firewalls, intrusion prevention systems and advanced malware protection products.

A large number of its products are based on Snort, an open-source intrusion detection system (IDS). Sourcefire’s solutions have hit the 4 million downloads mark to date (company sources).

The acquisition will help Cisco to strengthen its position in the network security market. The company is particularly strong in the government vertical and the acquisition will enable it to attract more corporate customers. The acquisition will also allow Cisco to develop and offer end-to-end security platforms in the industry.

The acquisition comes at a time when the Internet security market is evolving rapidly and Cisco is aligning its long-term growth strategy around the “Internet of Everything” concept. Other IT bellwethers such as IBM (IBM - Analyst Report), Juniper (JNPR - Analyst Report), Symantec (SYMC) and EMC (EMC) are also focusing on acquisitions in order to boost core competencies.

Cisco Systems is the leading provider of IP-based networking services and other products. As part of its acquisition strategy, Cisco bought 11 companies in 2012. In Jan 2013, Cisco spent $475 million to purchase Intucell, a company that develops advanced self-optimizing network (SON) software to enable mobile carriers to plan, configure, manage and optimize cellular networks automatically.

Further, the company acquired SolveDirect, which provides cloud-based solutions for enterprises and service providers. Cisco also acquired data-virtualization start-up – Composite Software – for $180 million. Recently, it completed the acquisition of energy management solution provider – JouleX – for $107 million in cash and retention-based incentives.

We believe that these acquisitions will broaden Cisco’s customer base and network offerings, providing the company a significant competitive edge.

Cisco carries a Zacks Rank #3 (Hold).

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