Shares of Cisco Systems Inc. (NASDAQ: CSCO) rose sharply in trading today after the network equipment maker announced that it would acquire privately held cloud computing company Meraki Inc. for approximately $1.2 billion in cash.
Meraki is based in San Francisco, California. The company provides midmarket customers with easy-to-deploy on-premise networking solutions that can be centrally managed from the cloud. CSCO said that the acquisition complements and expands its strategy to offer more software-centric solutions to simplify network management, help customers empower mobile workforces, and generate new revenue opportunities for partners.
The acquisition of Meraki will expand CSCO’s network offerings by providing scalable solutions for midmarket businesses.
Rob Soderbery, Senior Vice President of Cisco Enterprise Networking Group, said that the acquisition of Meraki allows CSCO to make simple, secure, cloud managed networks available to its global customer base of mid-sized businesses and enterprises. Soderbery said that these companies have the same IT needs as larger organizations, but without the resources to integrate complex IT solutions. He added that 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 devices.
As per the terms of the agreement, CSCO will acquire Meraki for around $1.2 billion in cash. The company will also pay retention-based incentives. The transaction is expected to close in the second quarter of CSCO’s fiscal year 2013.
Investors reacted positively to the transaction, pushing CSCO shares higher in trading today. CSCO rose to an intra-day high of $18.34 in trading today before finishing the day 1.73% higher at $18.30 on volume of 40.37 million.
Year-to-date, CSCO shares have gained 1.22%, underperforming the S&P 500.
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