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Cisco (CSCO) Set to Acquire Kenna Security: Major Takeaways

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Cisco Systems (CSCO - Free Report) recently announced its intent to acquire Kenna Security, Inc to boost its security offerings. The financial terms have not been revealed by the companies.

The acquisition, subject to customary and regulatory approval, is projected to conclude in fourth-quarter fiscal 2021. Headquartered in Santa Clara, CA, Kenna Security is a privately-held company specializing in risk-based vulnerability management.

Cisco further added that it will combine Kenna Security’s offerings with its SecureX platform.  The integration is aimed at helping clients in prioritizing vulnerabilities and automating remediation measures to enhance security.

 

With acquisition of Kenna Security, Cisco customers will also benefit from lower friction pertaining to compliance efforts. Also, the combination of Kenna Security offerings with SecureX platform will improve co-operation between security and IT teams as well as enable efficient handling of threats and reduce overall cyber risk for businesses, added Cisco.

Cisco’s SecureX solution is a comprehensive cloud-based security platform aimed at fortifying enterprise security infrastructure with unified visibility, automation and security capabilities across network endpoints, applications and the cloud. The platform was made generally available in June 2020 and boasts 7000 customers.

Increasing need for Cybersecurity Bodes Well

Increasing risk of sophisticated cyberattacks is boosting demand for strong security solutions. The attacks have considerably risen in the wake of COVID-19 crisis as hackers take advantage of sudden shift to remote work, online learning and telehealth trend.

Further, as enterprises increasingly adopt bring-your-own device (BYOD) policy amid continuation of work from home set up has led to increases in number of network end-points. This poses increased cyber security threats.  

Per a Mordor Intelligence report, the global cybersecurity market is anticipated to witness a CAGR of 14.5% between 2021 and 2026 and reach $352.25 billion.  

This projections bodes well for Cisco, which has been one of the dominant players in the cyber security domain. In the second quarter of fiscal 2021, Cisco’s Security revenues increased 10% to $822 million owing to solid demand witnessed by SecureX platform.

Cisco witnessed double-digit growth for cloud-based solutions, including Duo and Umbrella in the last reported quarter. The company is gaining from shift to cloud-based security capabilities and growing clout of Secure Remote Worker.
The company is also witnessing strong momentum in identity and access, advanced threat and unified threat management solutions.

Nonetheless, these acquisitions are likely to keep Cisco’s operating margins under pressure, at least in the near term. Sluggish enterprise IT spending due to coronavirus crisis also might impact the demand for the company’s offerings.

Zacks Rank & Key Picks

Currently, Cisco carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector are NetApp (NTAP - Free Report) , Seagate (STX - Free Report) and NVIDIA (NVDA - Free Report) . All the three stocks sport a Zacks Rank #2 (Buy), at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for NetApp, Seagate and NVIDIA is currently pegged at 8.8%, 1.2% and 15.2%, respectively.

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