NEW YORK (TheStreet) -- Cisco Systems Inc. (CSCO) - Get Report announced on Tuesday morning that it intends to buy the privately held security company OpenDNS for $635 million in cash in order to increase its cloud solutions and Internet-of-things offerings.

"The acquisition will boost Cisco's Security Everywhere approach by adding broad visibility and threat intelligence from the OpenDNS cloud delivered platform," Cisco said in a statement announcing the transaction.

The deal is expected to close during the fiscal 2016 first quarter.

"As more people, processes, data and things become connected, opportunities for security breaches and malicious threats grow exponentially when away from secure enterprise networks," Cisco chief technology and strategy officer Hilton Romanski said in a statement.

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"OpenDNS has a strong team with deep security expertise and key technology that complements Cisco's security vision. Together, we will help customers protect their extended network wherever the user is and regardless of the device," Romanski continued.

Shares of Cisco are up by 0.73% to $27.74 in pre-market trading this morning. 

Insight from TheStreet Research Team

TheStreet's Michael Khouw recently commented on Cisco in a post on Action Alerts Options. Here is a snippet of what Khouw had to say from the most recent weekly roundup.

We can do all the homework we want, but we can't fight the tape. Cisco's valuation is reasonable. You might have thought that its annual investor day, which it hosted last week, would have created a boost.

The company has been doing a lot of things right, shifting increasingly from hardware to software and cloud-related initiatives. It has decent (and growing) margins and, if we exclude the cash on the balance sheet (which it has a good history of returning to shareholders via buybacks and dividends), it is trading at less than 10x FY2016 estimates.

-Michael Khouw 'Weekly Roundup' Originally Published on 06/29/2015 on Action Alerts Options.

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Separately, TheStreet Ratings team rates CISCO SYSTEMS INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate CISCO SYSTEMS INC (CSCO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, notable return on equity, reasonable valuation levels and increase in net income. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CSCO's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 5.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, CISCO SYSTEMS INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 11.4% when compared to the same quarter one year prior, going from $2,187.00 million to $2,437.00 million.
  • You can view the full analysis from the report here: CSCO Ratings Report