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Cisco’s Sourcefire Acquisition Means a Security Market Share Gain

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Cisco is the leading player in the network security market

Cisco (CSCO) has always been a major player in the network security market. According to a report from Synergy Research Group, Cisco’s share of the worldwide network security market was 30% in calendar 3Q14. This was followed by players such as Check Point (CHKP), Symantec (SYMC), Huawei, Juniper Networks (JNPR), and Palo Alto Networks (PANW). The report also mentions that the global network security market reached $9 billion in the last year.

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As more and more data are transmitted and stored through mobile devices and cloud computing, there’s a growing need for security to combat advanced cyber attacks and data breaches. To further strengthen its position in the network security market, Cisco acquired Sourcefire in July 2013 for $2.7 billion. Sourcefire’s intrusion detection products have helped Cisco gain business from the US government and enterprises looking to protect their networks.

Cisco’s looking to grow its security business further

The benefit from Sourcefire reflects in Cisco’s financials. As the chart above shows, the year-over-year revenue growth for Cisco’s security segment has been increasing in double digits since Cisco acquired Sourcefire. The growth came down to a nominal 6% in the last quarter, as fiscal 2Q14 and fiscal 2Q15 both include additional revenues from Sourcefire.

During the latest earnings call, Cisco mentioned that the company is looking to improve the growth prospects of its security business by venturing into consulting projects around security. In this regard, Cisco also acquired Neohapsis in December last year. Neohapsis is a security consulting and services company.

If you’re bullish about Cisco’s prospects in the SDN market, you could invest in the PowerShares QQQ Trust, Series 1 (QQQ). QQQ invests about 3% of its holdings in Cisco.

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