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Cybersecurity stocks heat up on Cisco-Sourcefire deal

July 23, 2013: 1:14 PM ET

Click the chart to track shares of Sourcefire.

While the broader market was largely quiet Tuesday, one sector was on fire: cybersecurity.

Shares of Sourcefire (FIRE) jumped nearly 28% after networking giant Cisco (CSCO) said it agreed to buy cybersecurity firm for $2.7 billion.

The deal, which was priced at a 29% premium over Sourcefire's closing price Monday, will help Cisco bolster its network security services.

"Today's sophisticated threats are able to circumvent traditional, disparate security products," said Christopher Young, senior vice president in Cisco's security group. "With the acquisition of Sourcefire, we believe our customers will benefit from one of the industry's most comprehensive, integrated security solutions – one that is simpler to deploy, and offers better security intelligence."

The deal might just be the "tip of the iceberg" when it comes to mergers and acquisitions in the cybersecurity space, according to FBR analyst Daniel Ives. He expects a rush of deals, with big players like IBM (IBM), Juniper (JNPR), Symantec (SYMC) and EMC (EMC) buying up smaller firms.

Traders on StockTwits had mostly positive reviews of the deal.

just seeing that $CSCO took out $FIRE today, nice, one of my favorite names for several years, cyber security theme on fire again

Sourcefire $FIRE away to $CSCO as I watched knowing 7/29 earnings report was coming. This is an important and needed company for Cisco.

Cisco had a pretty stellar first quarter, and analysts are hoping to see some of the same this time around. They expect Cisco to report a 6% jump in earnings and a 9% bump in revenue.

$CSCO buying Source Fire is a good direction for the company.

Speculation about which firms could be the next takeover targets was also a hot topic, pushing shares of several other cybersecurity companies higher Tuesday.

Smaller security plays acting well on $CSCO for $FIRE deal: $PFPT $IMPV$QLYS

Fortinet (FTNT) and Proofpoint (PFPT) shares climbed more than 4%, while Qualys (QLYS) and CACI International (CACI)  shares rose more than 1%.

$FIRE sale good for $PANW $FTNT $ININ

Though some analysts expect the Cisco-Sourefire deal to be a catalyst for more M&A activity, traders point out that there have already been some big deals in recent years: Intel (INTC) bought McAfee for nearly $7.7 billion in 2010, while Hewlett-Packard (HPQ) acquired ArcSight for $1.5 billion the same year.

Game changing consolidation?Hold your horses.Covering space $FTNT$FIRE since $INTC/MFE@60% premium in'10,later $HPQ-ARST. #SteadyM&Activity

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Hibah Yousuf
Hibah Yousuf
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Hibah Yousuf is a reporter at CNNMoney, where she covers stocks, bonds, commodities and currencies trading across the globe, as well as corporate earnings and other markets-related news. Prior to joining the site in 2009, she interned at Money Magazine.

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