Why Sourcefire Shares Got Hot

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sourcefire (UNKNOWN: FIRE.DL  ) soared a whopping 28% today after tech gorilla Cisco Systems (NASDAQ: CSCO  ) agreed to acquire the cybersecurity specialist for $2.7 billion. 

So what: The all-cash deal values Sourcefire at $76 per share and represents a premium of 29% to its closing price on Monday. Cisco is making the move to expand beyond its bread-and-butter networking gear business, naturally fueling speculation that other tech giants like IBM and EMC are looking to make a small cybersecurity purchase of their own.

Now what: The deal is expected to close in the second half of 2013 and will likely be slightly dilutive to Cisco's GAAP earnings in 2014. "Sourcefire aligns well with Cisco's future vision for security and supports the key pillars of our security strategy," said Cisco's vice president of corporate development Hilton Romanski. "Through our shared view of the critical role the network must play in cybersecurity and threat defense, we have a unique opportunity to deliver the most comprehensive approach to security in the market." So while Sourcefire's upside is likely limited at this point, another cybersecurity play like Fortinet -- which is up 5% on today's news -- might be a possible buyout target worth considering.   

It's incredible to think just how much of our digital and technological lives are almost entirely shaped by just a handful of companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.



Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2551805, ~/Articles/ArticleHandler.aspx, 4/16/2014 12:41:28 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement