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Cisco Systems Inc. (CSCO - Analyst Report) recently completed its acquisition of data-virtualization start-up Composite Software for $180 million and retention-based incentives. The deal is expected to close toward the end of the first quarter of fiscal 2014.

San Mateo, Calif.-based Composite Software is a privately-held data virtualization software company. It was founded in 2001 by Michael R. Abbott. Composite’s software brings together data from traditional and new sources such as cloud and big data, offering a consolidated view. This allows organizations to make better decisions in real time. 

Upon the completion of the deal, Composite will become part of Cisco’s Smart Services portfolio, augmenting Cisco’s offerings to service providers. Data virtualization is gaining importance as it allows organizations to grow, take timely decisions to deploy resources in a more optimal way and hence improve productivity. Thus, the acquisition will provide Cisco the required leverage to boost its  data virtualization solutions. 

Cisco Systems is a leading provider of IP-based networking services and other products. As a part of its acquisition strategy, Cisco bought 11 companies in 2012. In January, Cisco spent $475 million to purchase Intucell, a company that develops advanced self-optimizing network (SON) software to enable mobile carriers to plan, configure, manage and optimize cellular networks automatically.

Further, it acquired cloud services management business SolveDirect for an undisclosed amount. SolveDirect offers cloud-based solutions for enterprises and service providers, which help to streamline data and workflows across unified networks.

We believe that these acquisitions will broaden Cisco’s customer base and network offerings, providing the company with a significant competitive edge.

Cisco’s revenues in the second quarter of fiscal 2013 increased 1.7% sequentially and 5.2% year over year to $12.1 billion. Products (78.0% of total revenue) were up 3.3% year over year to $9.4 billion. Services (22.0% of total revenue) jumped 12.5% year over year to $2.7 billion.

Cisco carries a Zacks Rank #3 (Hold). Other companies in the sector that also look attractive include Infinera Corp. (INFN - Snapshot Report), Silicom Ltd. (SILC) and Juniper Networks (JNPR - Analyst Report). While Infera Corp. and Silicom carry a Zacks Rank #2 (Buy), Juniper carries a Zacks Rank #3 (Hold).

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