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Cisco buys Sourcefire for $2.7 billion

Network equipment developer Cisco Systems announced Tuesday it is acquiring network hardware and software security company Sourcefire for $2.7 billion.

The boards of directors for both companies have given the approval for Cisco to pay $76 per share in exchange for each share of Sourcefire and assume outstanding equity awards worth $2.7 billion, Cisco said in a release.

Cisco and Sourcefire will continue to operate independently until sometime before the end of the year, when the acquisition is scheduled to close. Sourcefire employees will then merge with Cisco's Security Group, led by senior vice president Christopher Young.

The two companies will combine products, technologies and research to address today's new age of threats, which expands beyond the traditional perimeter to include web apps, mobile and cloud. Sourcefire, founded in 2001 and based in Columbia, Md., makes open-source intrusion prevention , next-generation firewall and advanced threat detection technology.

“Cisco's acquisition of Sourcefire will help accelerate the realization of our vision for a new model of security across the extended network,” said Martin Roesch, Sourcefire founder and chief technology officer.

For nearly three decades, San Jose, Calif.-based Cisco has led the networking industry and offers an array of products and services, including routers and cloud management. Cisco has spent money on security in the past, buying virtual security company Virtuata last summer and web security provider ScanSafe in 2009. Cisco's commitment to this market was first realized in 2006, when it bought spam protection company IronPort for $830 million.

But despite a number of acquisitions, its network security business reportedly has been struggling, losing out to smaller, but more nimble, competitors that have cut into its market share. Last year, Cisco was close to an acquisition deal with one such company, Palo Alto Networks, but the two could not agree on a deal valuation and were "billions" apart, according to Reuters. As a stop-gap, Cisco settled on 28-person Czech company Cognitive Security, but the tech giant was still seeking out a mega deal.

Sourcefire became it.

“If Cisco wanted to stay in the network security business they needed to make some kind of move,” Mike Rothman, president of security research and advisory firm Securosis, told on Tuesday. 

He said market perception of Cisco had not been so hot in recent years, explaining the acquisition “was an expensive but decisive move” and that the “existing product line was not competitive with where network security is going. It was the only option they had.” 

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