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Where Does Cisco Stand in the Cybersecurity Space?



Cisco’s scale in the cybersecurity space

Earlier in this series, we discussed Cisco’s (CSCO) recently announced the acquisition of AppDynamics. Now, let’s look at the company’s value proposition among select cybersecurity companies in the United States. Let’s start with Cisco’s size.

On January 30, 2017, Cisco was the largest global player in the security space by market capitalization. Cisco is considered a leader in the overall security appliance market. Symantec, Palo Alto Networks (PANW), FireEye, Barracuda (CUDA), and Fortinet (FTNT) are some of the other leading players in this space.
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Cisco’s enterprise value multiples

Now let’s look at Cisco’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple. We’ll also look at other US software players. Cisco was trading at a forward EV-to-EBITDA multiple of ~7.1x on January 30, 2017. This metric was lower than Symantec’s ~11.5x and Palo Alto Networks’ multiple of ~28.8x.

Cisco’s dividend yield

Cisco’s forward annual dividend yield was ~2.3% on January 30, 2017. This was higher than Symantec’s forward annual dividend yield of ~1.1% as of January 30. Most of the companies in the cybersecurity space are relatively new, which is why most of them, including Palo Alto Networks, FireEye, and Fortinet, don’t pay dividends.

For diversified exposure to select software companies in the United States, you may want to consider investing in the SPDR S&P 500 ETF (SPY), which has 8% exposure to the application software industry.


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