Assessing Various Cisco Acquisition Rumors

At any given time, Cisco Systems is actively considering a number of possible acquisitions, so it’s no wonder that the market invariably is awash in rumors about which company Cisco will buy next.

Currently, there are several rumors making the rounds about companies Cisco allegedly is on the verge of buying.

One persistent rumor is that Cisco is considering a purchase of McAfee, but that seems extremely improbable. Cisco likely has no interest in entering the low-margin antivirus marketplace, and too many of McAfee’s other products either don’t mesh well with Cisco’s strategic objectives or overlap with already successful products Cisco sells today. Besides, Cisco is closer with Trend Micro than with McAfee, so it probably would acquire Trend if it really felt the need to bolster its content-security capabilities.

If McAfee is to be acquired, I believe private-equity interests will be the buyer. Such talks are said to have taken place. 

Cisco also is said to be interested in Vontu, an early leader in data-loss prevention (DLP) solutions. I believe Cisco and Vontu have spoken on at least a couple occasions, and I know that Cisco thoroughly reviewed the DLP market several months ago.

My understanding is that Cisco has decided that, while the DLP market is interesting and Vontu appears to have excellent solutions and a leading position in the market, the market segment itself is not ideally suited to Cisco’s core competencies.  It’s not an area where Cisco feels it will have a natural advantage over others likely to enter the space.

I still believe that Symantec will acquire Vontu, though the latter could also be snapped up at some point by HP, IBM, or even Microsoft. 

Another company reputed to be in Cisco’s acquisitive sights is WAN-optimization market leader Riverbed Technology. Cisco already has WAN-optimization products, derived partly from its acquisition of FineGround Networks Inc., a company that focuses on Web-based applications acceleration and optimization, for approximately $70 million in May of this year.

Cisco is competing against Riverbed with its WAAS (Wide Area Application Services), an offering that combines WAN optimization, application acceleration and WAFS (wide-area file services) in a single product. WAAS is software that can run in network modules for Cisco’s 2800, 3700 and 3800 ISRs (Integrated Services Routers) or in three Cisco appliances.

Riverbed has made its product offerings more scalable, enabling it to compete with Cisco for large enterprise accounts that might be influenced by previous investments in Cisco network infrastructure. As Riverbed’s recent quarterly results attest, the company is doing extremely well.

My view is that Cisco is not ready to throw in the towel on its own WAN-optimization efforts just yet, but it is possible Cisco might revisit the subject if Riverbed extends its market lead further.

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