Contact: Scott Denne
Cisco continues its aggressive streak with the $293m purchase of CloudLock. The networking equipment giant has spent $2.2bn on five deals since the start of the year – its busiest first half since 2012. It’s not just the amount of spending that marks the aggressive streak. Cisco has been paying healthy multiples. Today’s transaction values the cloud security vendor at over 10x trailing revenue: its acquisitions of cloud application manager CliQr and early-stage chip startup Leaba Semiconductor were also likely above that multiple.
To pick up CloudLock, a cloud application security broker, Cisco needed to continue to pay a high multiple, as several deals in that segment have gone off at a premium. Adallom and Elastica were able to fetch above $200m when they sold to Microsoft and Blue Coat, respectively. Both were only starting to generate revenue. Skyfence was able to get $60m from Imperva before earning a dime in revenue.
Cisco has been particularly active in security M&A. In addition to CloudLock, it paid $452m for Lancope and $635m for OpenDNS, both at above-market multiples. There’s good reason for that. Security is the company’s second-fastest-growing segment, up 17% to $482m in sales last quarter. The macro trends are in its favor. According to our most recent Voice of the Enterprise: Information Security survey, 62% of all IT managers expect security budgets to increase over the next 12 months.
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