Networking equipment giant Cisco (NASDAQ:CSCO) Monday announced it is buying cloud networking company Meraki for $1.2 billion in cash and retention-based incentives.
Shares of the company rose 1.17 per cent in pre-market hours, trading at $18.20.
Cloud computing involves storing software applications in remote data centres that are accessed over the internet and Cisco said that the acquisition “complements and expands” its ability to offer more “software-centric solutions” and generate new revenue opportunities for partners.
Meraki’s “high-velocity” software development methodology and “tightly linked” inside sales and channel model will form the new Cloud Networking Group, said the company.
The acquisition is expected to close in the second quarter of fiscal 2013.
"The acquisition of Meraki enables Cisco to make simple, secure, cloud managed networks available to our global customer base of mid-sized businesses and enterprises,” said Cisco senior VP of the company’s Enterprise Networking Group.
“These companies have the same IT needs as larger organizations, but without the resources to integrate complex IT solutions.
"Meraki's solution was built from the ground up optimized for cloud, with tremendous scale, and is already in use by thousands of customers to manage hundreds of thousands of devices."
San Francisco-based Meraki also has offices in New York, London and Mexico, and offers customers Wi-Fi, switching, security and mobile device management centrally managed from the cloud. The company was founded by members of MIT's laboratory for computer science.
Cisco noted that Meraki’s solutions support BYOD (bring your own device), guest networking, application control, WAN optimization, application firewall and other advanced networking services.
The purchase follows its $125 million purchase last week of Cloupia, which develops software that helps data centre operators manage their resources.
In July it acquired privately held network security firm Virtuata in an effort to provide its clients with a more secure data network and said it would consolidate the Virtuata team into its own data center group.
Cisco has been busy since restructuring last year to target core product areas like routing and switching gear that transfers data between computers.
Since 2010, the company has made quite a few strategic acquisitions, to meet the growing demand of telecommunications and other companies for networks that support mobile and cloud computing.
Cisco Systems designs, manufactures and sells Internet protocol (IP)-based networking and other products related to the communications and information technology (IT) industry, and provides services associated with these products and their use.
The company's products, which include primarily routers, switches, and other technologies, are installed at enterprises, public institutions, telecommunications companies, commercial businesses and personal residences.
Last week, Cisco posted profits and sales that beat expectations with first-quarter net income of $2.1 billion, or 48 cents per share, on revenue of $11.9 billion.
During the current second quarter, it expects sales to grow between 3.5 per cent and 5.5 per cent and earnings per share of 47 cents to 48 cents, pretty much in line with analysts' expectations.
With a global reach and a wide array of networking products, Cisco is often viewed as a bellwether of the global economy.