Cisco Security: 3 Alternative Acquisition Targets

Cisco Systems (NASDAQ: CSCO) apparently has stumbled in the security market. Reuters suggests the networking company may need to buy (rather  than build) its way out of the situation. Potential targets mentioned include Palo Alto Networks (NYSE: PANW), FireEye, Sourcefire, Fortinet (NASDAQ: FTNT) and Barracuda Networks. But The VAR Guy has at least three other potential deals in mind. Here they are.

First, the background: Cisco apparently has been losing security market share to Juniper Networks, Checkpoint Systems and Palo Alto Networks, Reuters claims. The article goes on to suggest that Cisco tried — and failed — to buy Palo Alto Networks.

Reuters’ report is particularly timely for Juniper, which is hosting its global channel partner conference this week in Las Vegas; it’s one of The VAR Guy’s Top 100 Channel Partner Conferences for 2013. No doubt, Juniper will be flexing its security muscle this week.

So how should Cisco Systems respond? Instead of pursuing obvious targets for acquisition, here are three alternative routes to consider:

1. Kaspersky Lab: On the one hand, Kaspersky Lab has a big consumer base of users — which isn’t exactly Cisco’s core market. But Kaspersky also has a close security relationship with VMWare. And CEO Eugene Kaspersky is developing a cyber secure operating system, which seeks to protect critical infrastructure (nuclear facilities, power utilities, electric grids, etc.) from hackers. Prediction: Kaspersky is seeking to generate $1 billion in annual bookings by 2014. That could be too rich for Cisco’s blood.

2. Sophos: Another anti-virus company. But the real story here is Sophos’s Unified Threat Management (UTM) and mobile device management (MDM) technology. Both are hot areas for customers, partners and investors. Apax Partners, a private equity firm, acquired Sophos in 2010. What’s the exit strategy and potential price tag? Hmmm… Prediction: Not sure if Sophos is too large to attract Cisco’s interest.

3. Mobile Device Management, Mobile Applications Management: An incredibly hot market, though MDM and MAM will likely fold into the broader IT systems management market. Companies like AirWatch and Good, among others, are intriguing. Oh, and watch MaaS360, a channel-friendly play. Prediction: Secure connections to tablets and smarphones seems like a natural direction for Cisco.

Regardless of Cisco’s direction, it sounds like CEO John Chambers has handed Senior VP Chris Young a “blank check” for the next two to three years to hire and acquire as he sees fit to overhaul Cisco’s security business and spark a rebound, Reuters reported.

So, how will Young spend that blank check? The VAR Guy is listening and watching for answers.