Will Cisco (CSCO) Stock be Helped by OpenDNS Acquisition?

NEW YORK (TheStreet) -- Cisco Systems Inc. (CSCO) 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.

"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.

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