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Cisco (CSCO) to Buy BabbleLabs to Augment Webex Experience

Cisco Systems CSCO recently announced its plan to buy out BabbleLabs to improve Webex video experience. However, the financial terms of the deal have been kept under wraps.

The acquisition, subject to customary and regulatory approval, is projected to conclude in the company’s first-quarter of fiscal 2021.

Post the closure, BabbleLabs will join Cisco's Collaboration Group, which is a part of the company’s Security and Applications Business.

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. Price and Consensus

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BabbleLabs is a privately held company, which boasts of expertise in noise removal and speech improvement technology. The startup uses Artificial Intelligence (AI) to identify and eliminate background noises (in real time) to augment the communication experience.

The BabbleLabs’ buyout will help Cisco to elevate the video meeting experience for its Webex users, who are looking for ways to deal with background noises as they adapt to remote working situation induced by the coronavirus outbreak.

Synergies from BabbleLabs’ acquisition are expected to aid Cisco in sustaining momentum of its Webex offerings, that have gained a significant traction this year due to work from home trend. Notably, in the fourth quarter of fiscal 2020, Webex solutions witnessed double-digit growth. The surge in users bodes well for the company’s top-line growth.

Webex Enhancements to Give a Competitive Edge

Coronavirus crisis led work-from-home wave has triggered the demand for teleconferencing, workspace collaboration and telehealth services. This has bolstered the adoption of video meeting and conferencing solutions. With this trend unlikely to go away soon, video conferencing market is likely to witness a CAGR of 9.9% between 2020 and 2027, per a Grand View Research report.

In a bid to capitalize on video conferencing boom, Cisco is strengthening Webex with new added features and acquisitions to improve its competitive position in the market. Apart from BabbleLabs, Cisco had acquired Voicea in September 2019. Voicea has provided AI-enabled transcription feature to Webex solutions.

Markedly, the company also unveiled a design update for Webex, including dedicated tabs for messages and contacts, which enhanced its functionalities and made it easier to use. Also, the company’s collaboration with Alphabet’s GOOGL Google G Suite to ensure inter-operability between Webex and Hangouts is promising.

These endeavours are expected to help Webex bolster its subscriber base and impart it an edge over competitors like Zoom Video Communications ZM and Microsoft’s MSFT Teams app.

Zoom Video is undeniably the biggest gainer of the coronavirus-induced work from home trend. The company saw a 354% growth in customers (more than 10 employees) and a 90% growth in customers (with over $100,000 in the trailing 12-month (TTM) revenues) for the first quarter of fiscal 2021.  

To up its ante, Microsoft has introduced Together mode feature to Teams in a bid to make video meetings lively and dynamic while enhancing user experience. The company also has bigger plans of facilitating more flexibility into content presentations together with video.

Nevertheless, Webex’s better security options and its end-to-end encryption capabilities are likely to help Cisco increase its presence in the enterprise video conferencing market.

Currently, Cisco carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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