Cisco Systems Inc.
) 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
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
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
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
Hewlett Packard Company
), which have been picking up market share.
Cisco carries a Zacks #2 Rank, implying a Buy rating over the
next one to three months.
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