Cisco To Boost Security Portfolio With CloudLock Acquisition

In a bid to expand its security portfolio, Cisco Systems (NASDAQ:CSCO) recently announced its plans to acquire a cloud-based security company, CloudLock, for $293 million in cash and stock.

Cisco expects the acquisition to close in the first quarter of fiscal 2017, subject to customary closing conditions. CloudLock will be incorporated into Cisco's networking and security business group under the leadership of senior vice president and general manager, David Goeckeler.

Waltham, MA-based CloudLock provides a cloud platform that offers online security solutions for business users. CloudLock uses application programming interface (API) management tools to let enterprises apply and monitor security on documents and other content that they share and store in cloud-based applications. It works with major platforms, such as Amazon (NASDAQ:AMZN) AWS, Google (NASDAQ:GOOGL) Apps and Microsoft's (NASDAQ:MSFT) Office 365, among a plethora of other apps and software.

In 2015, the company's revenues totaled to $13.2 million. It has about 130 employees, with offices in San Francisco, Washington D.C., London and Tel Aviv.

The buyout will enhance Cisco’s current cloud security offerings through increased visibility and threat awareness of CloudLock’s cloud delivered platform. The purchase will help the network equipment maker to broaden its efforts and meet the changing compliance and security needs.

The acquisition comes at a time when the Internet security market is evolving rapidly and Cisco is aligning its long-term growth strategy to capitalize on the “Internet of Everything” trend. As cloud computing and various mobile devices gain popularity, the need for secure networks for data transfer and related services also increases. Additionally, enterprise IT teams are facing great challenges to detect potential threats from these unmonitored and potentially unsecure entry points into the network, creating tremendous security risk.

Therefore, Cisco aims to target this endeavor by looking for integrated hardware/software/services solutions to deal with security threats.

Cisco Systems is the leading provider of IP-based networking services and other products. For several years, the company has been expanding its security portfolio through in-house development. It has also made several acquisitions such as OpenDNS, Neohapsis, Virtuata, Sourcefire, Cognitive Security and ThreatGrid to bolster its offerings.

We believe that this acquisition will broaden Cisco’s customer base and security network offerings, providing it with a significant competitive edge.

Cisco currently has a Zacks Rank #3 (Hold).