The cybersecurity industry saw impressive growth last year as corporations scrambled to get their houses in order following a series of serious breaches throughout the year. For example, the economic damage of ransomware attacks (which lock computer screens and demand a ransom) grew to an estimated $5 billion in 2017 from just $325 million in 2015 and it is expected to boom in the coming years.
There are quite a few cybersecurity specialists for investors looking to take advantage of this burgeoning market, but one of them stands tall above the rest: Cisco (NASDAQ: CSCO). You might argue that Cisco isn’t a pure-play cybersecurity company because its primary business is selling networking equipment such as routers and switches. But that is what separates Cisco from the rest of the field, and a closer look at the performance and size of its security business will make clear why it is one of the best bets in this space.
Cisco is definitely one of the best bets to take advantage of this market. Last quarter, Cisco pulled in $585 million from its cybersecurity business, a jump of 8% from the prior-year period. Their cybersecurity business eclipses the pure-play companies in this space. This isn’t surprising, as Cisco has been earning its credentials as a networking equipment company for a long time, giving it an existing clientele to which it can sell its cybersecurity services. The company can also bundle its cybersecurity products into existing networking hardware and software products without having to spend much money on customer acquisition. This gives Cisco an advantage over pure-play rivals who have to fight aggressively for a share of the competitive cybersecurity market.
The company’s existing network of clients is already driving the company’s cybersecurity business. Its deferred revenue from this segment grew 42% year over year in the last reported quarter, outpacing its competitors. More importantly, Cisco is continually improving its cybersecurity offerings by integrating features like artificial intelligence for predicting threats and accelerating the response time upon detection. Additionally, Cisco has very deep pockets compared to its rivals.
Cisco can bundle its security offerings with other products, lower the pricing, and carve out more market share. It recently deployed a new service known as Cisco Security Connector, which can gather all the network traffic generated by iOS devices and applications. The product then prevents the user from going to malicious sites. Moreover, this application can be deployed using Cisco’s cloud-based enterprise mobility management software, which means that Cisco can simply push this new service to customers without spending a fortune.
This strong cross-selling opportunity, deeper pockets puts Cisco at an advantage over its cybersecurity rivals, which are spending a lot to acquire new customers. This is why Cisco’s margin profile will be better than its rivals’. In all, It is set to dominate the cybersecurity market for a long time given its financial muscle and an established network of clients.