Cisco Catches a Cloud

Cisco (Nasdaq: CSCO  ) has agreed to pay $183 million in cash to acquire ScanSafe, a digital security provider whose offerings live and work on the Web.

News headlines suggest that security is the story of this deal. They're wrong. Cisco has been acquiring pieces of a security portfolio for years, including an $830 million purchase of IronPort Systems in 2007. IronPort was and still is the major alternative to Secure Computing's gateway security offerings, which are now maintained by McAfee (NYSE: MFE  ) .

What's striking here is that Cisco is buying a cloud-computing service. This isn't software that can be added to its routers or other networking equipment; it's distinct, an off-site suite more akin to what salesforce.com (NYSE: CRM  ) , NetSuite (NYSE: N  ) , and SuccessFactors (Nasdaq: SFSF  ) offer than anything else you'll find in Cisco's portfolio.

Cisco's take on cloud computing is just as interesting to me. Last week, one of the company's security bloggers, Seth Hanford, posted an interesting piece about Microsoft's (Nasdaq: MSFT  ) embarrassing data failure with Sidekick handhelds. The title: "Cloud Computing: Not a Security Panacea."

Hanford makes several good points in the piece. My favorite: "What remains to be seen is whether consumer expectation and assumptions about the nature of cloud computing can be satisfied by companies that only offer hosted services, or those that do not include cost-prohibitive design decisions."

Precisely. Expectations are difficult to satisfy under the very best conditions. With so much hype attached to cloud computing, providing satisfactory protection may very well be impossible -- a delicious irony.

Cloud computing may not be a security panacea, but Cisco will pay for it anyway. Why take a chance when you're the market leader, and blessed with tens of billions in cash and securities?

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Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy is checking the couch for spare change.


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  • Report this Comment On November 04, 2009, at 5:10 PM, rogtx wrote:

    ScanSafe is already a proven service and a clear market leader in the space, so the question of whether or not Cisco will be able to provide "satisfactory protection" has already been answered. Cisco isn't looking for a security panacea, they are looking to bring a mountain of credibility (and money) to a very specific niche - URL filtering and malware scanning for corporate web users. ScanSafe has been doing it successfully for years, so how Cisco accelerates adoption and integrated technologies will be the real question.

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