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Cisco Systems Inc. (CSCO - Analyst Report) recently announced that it has agreed to buy cloud services management business SolveDirect for an undisclosed amount. The acquisition is expected to close in the fourth quarter of 2013, subject to fulfillment of customary closing conditions.

Vienna, Austria-based SolveDirect offers cloud-based solutions for enterprises and service providers, which help to streamline data and workflows across unified networks.

Upon the completion of the deal, SolveDirect will become a part of Cisco's Services group, augmenting Cisco’s offering to service providers. The integration of SolveDirect's cloud-based solutions into Cisco’s portfolio is in support of its strategy of increasing its software-centric solutions to streamline network management, and automate the sharing of processes, data and workflows. These solutions will save time and energy by eliminating manual practices and lead to operational efficiency.

Cisco is keen on expanding its cloud computing business, 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. According to market research firm IDC, spending on public cloud services is expected to grow at a compound annual growth rate (CAGR) of 26.4% and 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 acquisition strategy, Cisco had bought 11 companies in 2012. In January, Cisco spent $475 million to purchase Intucell, a company which develops advanced self-optimizing network (SON) software to enable mobile carriers to plan, configure, manage and optimize cellular networks automatically.

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

Cisco carries a Zacks Rank #2 (Buy). Other competitors namely Hewlett Packard Company (HPQ - Analyst Report) and Silicom Ltd. (SILC) carry a Zacks Rank #1 (Strong Buy), while Juniper Networks (JNPR - Analyst Report) carries a Zacks Rank #2 (Buy).

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