Cisco Systems Inc. (CSCO - Analyst Report) recently announced its plan to buy privately-held Meraki Inc. for $1.2 billion in cash. The acquisition is expected to close in the second quarter of 2013, subject to fulfillment of customary closing conditions, including regulatory approval.
California-based Meraki offers cloud networking solutions for medium-sized businesses, which help to manage their corporate network using the Internet. These solutions include Wi-Fi, switching, security and mobile device management that is centrally managed from the cloud. Meraki also has offices in New York, London and Mexico.
Cisco management stated that Meraki will become a new division within the company known as the Cloud Networking Group. The integration of Meraki's Wi-Fi and cloud-networking solutions into Cisco’s portfolio will help the latter to continue with its strategy of increasing its software-centric solutions to streamline network management and empower customer workforces at remote locations.
The acquisition will also expand Cisco’s lineup of products for mid-sized customers. It will strengthen the company’s Unified Access platform, a product which is aimed at simplifying IT operations by integrating wired and wireless networks and their management.
Cisco is keen to expand on the cloud computing front, which is viewed by many technology firms as a key area for future growth. In fact, the whole computer-networking industry is undergoing a shift toward software-centric solutions that eliminate the need for expensive hardware and provide administrators remote access to networks.
Cloud computing allows users to store and process big data at remote data centers instead of on their own computers. On a positive note, Gartner expects the cloud services market to grow more than three times by 2015 to $177.0 billion.
According to market research firm IDC, spending on public cloud services is expected to touch $100.0 billion by 2016. This tremendous growth potential and the rapid adoption of cloud technologies will particularly help Cisco’s cloud infrastructure solutions portfolio in the long run.
Cisco Systems is a leading provider of IP-based networking and other products. As a part of its cloud expansion strategy, Cisco spent $125 million to purchase Cloupia last week, a company which develops software for data center operators.
We believe that these acquisitions will broaden Cisco’s customer base and network offerings, providing the company with a significant competitive edge over its peers, namely Juniper Networks (JNPR - Analyst Report), Hewlett Packard Company (HPQ - Analyst Report) and F5 Networks (FFIV - Snapshot Report), which have been picking up market share.
Cisco carries a Zacks #2 Rank, implying a Buy rating over the next one to three months.