Cisco Systems (CSCO - Free Report) recently announced the successful closure of CloudCherry acquisition. Notably, CloudCherry is a privately-heldCustomer Experience Management (CEM) company.Following the deal completion, it will join Cisco's Contact Center Solutions business.
Headquartered in Salt Lake City, UT, CloudCherry offers predictive analytics, customer journey mapping, out-of-the-box integrations, and real-time solution for contact center operators in the cloud or on-premises.
Synergies from Acquisition
The companies will work together to create a cognitive collaboration approach for customers operating contact centers in order to enhance customer experiences in real-time via cloud data analytics. This will help Cisco make more differentiated products, thereby providing customers with cross-selling facilities, discounts and service adjustments to ensure consumer satisfaction and loyalties.
The deal is significant to Cisco, particularly with respect to data analytics, AI, cognitive services, interoperability and ML that would eliminate resistance and make teams more productive with robust data privacy.
We believe that the acquisition will enable both the companies in implementing technology better. With this buyout, Cisco’s customers will be able to experience greater flexibility in operations, enhanced multi-level security, increased awareness and greater administrative control.
Per an IDC report, worldwide spending on cognitive systems and AI is expected to reach over $47 billion by 2020 at a CAGR of 55.1%.
Given the prospects of the sector, we believe such buyouts are a step in the right direction as these will help Cisco in staying ahead of the curve.
Over the past few years, strategic acquisitions have played an important role in shaping Cisco’s growth trajectory. The company recently announced its plan to acquire Acacia Communications and Voicea.
Notably, the company had also successfully closed the buyout of privately-held Duo Security. This acquisition will aid Cisco to deliver on its commitment of safeguarding customer data while focusing on people-centric secure enterprise IT approach.
Continuous strategic acquisitions should support Cisco in expanding product offerings, strengthening footprint in the security markets and building customer base. Further, these buyouts reveal the company’s intention to improve software and service capabilities in order to diversify revenue streams toward sources of a more recurring nature. It is taking this initiative in a bid to mitigate the cyclicality associated with hardware sales.
However, these acquisitions are likely to keep Cisco’s operating margins under pressure, as it requires significant amount of new investments.
Zacks Rank and Stocks to Consider
Cisco carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Alibaba Group Holding Limited (BABA - Free Report) , Garmin Ltd. (GRMN - Free Report) and Pure Storage, Inc. (PSTG - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Alibaba, Garminand Pure Storageis currently pegged at 28%, 7.4% and 19.9%, respectively.
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