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Networking equipment maker Cisco Systems Inc. (CSCO - Analyst Report) completed the acquisition of IT energy management solution provider JouleX for $107 million in cash and retention-based incentives in exchange for all shares of JouleX.

Atlanta-based JouleX, a privately-held IT provider of energy management software, was founded in 2009. The JouleX Energy Manager (JEM) provides automatic updates on energy consumption by all devices in the network. This information allows enterprises to monitor and control utilization of energy in offices, data centers and facilities management systems. This enables efficient cost management without hampering profitability.

Upon the completion of the deal, JouleX will become a part of Cisco's Industry Solutions Group, thus augmenting Cisco’s offerings for service providers. The acquisition will allow Cisco to expand beyond hardware offerings and generate recurring income. 

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. It continued its acquisition spree and bought SolveDirect, which provides cloud-based solutions for enterprises and service providers. Recently, Cisco acquired data-virtualization start-up Composite Software for $180 million.

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 Infinera Corp. and Silicom carry a Zacks Rank #2 (Buy), Juniper carries a Zacks Rank #3 (Hold).

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