Cisco Pays $1.2 Billion for Cloud Network Company Meraki

Cisco Systems Inc.

Cisco Systems Inc.

Networking giant Cisco Systems Inc. has informed that it is planning to acquire the privately owned cloud networking firm Meraki for a hefty sum of  roughly $1.2 billion. The acquisition of Meraki is consistent with Cisco’s attempts to implement the newest cloud and networking approach.

Smart Market Move for Cisco

According to Cisco Systems Inc., the takeover of cloud networking firm Meraki, which was established back in the year 2006, is expected to come to a conclusion in the second quarter of its fiscal year for 2013. In addition, the Cisco-Meraki takeover deal is still under consideration for regulatory approval. The second quarter of the company is due to end on the 31st of January.

Meraki, which is funded both by Google Inc. and Sequoia Capital, provides, inter alia, Wi-Fi technology as well as management of mobile devices from the cloud. It services are designed for mid-size businesses. The company has managed to raise an amount of approximately $80 million in venture capital with Sequoia Capital acting as the major investor in the Cisco-Meraki takeover deal.

According to market research analysts, the acquisition of Meraki is a completely rational move on the part of networking giant Cisco. They believe that the deal will permit Cisco to provide alternative solutions to traditional models of Wi-Fi deployment such as minor competitors, the list of which includes Ruckus Wireless and Aruba Networks, which made its debut on the 16th of November, 2012.

Market analysts were quick to note that networking giant Cisco did not really have much of anything to offer as a counter to that.

Position of Meraki

Sanjit Biswas, chief executive officer at Meraki, clarified in a letter sent to workers, which was also posted on the website of the company, that Cisco had first made its approach to the company many weeks prior to the finalization of the Cisco-Meraki takeover deal.

The founders of Meraki had initially declined the Cisco-Meraki takeover deal in order to maintain the strategy of Meraki which was targeted at an initial public listing.

As it was stated by the company: ” First, we decided to break it down into two major components — the qualitative and the quantitative,” underlying that the qualitative portion had created problems.

Biswas revealed that after many weeks of careful consideration, they decided in the later part of the previous week that joining networking giant Cisco was one of the best paths Meraki could hope to choose. He also provided statistics which showed that Meraki managed to achieve a run rate of $100 million in bookings, increased from only 120 to an impressive 330 employees and benefited from a positive flow of cash, all while successfully shipping a separate major product aimed for the family.

Certainly the deal will allow cloud networking firm Meraki to build the new Cloud Networking Group for the Cisco Company, but at the cost of its own IPO.

Richard Meryn
Richard Meryn, Associate Editor Industry Leaders Magazine (www.industryleadersmagazine.com)

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