Cisco Systems Inc. announced an agreement to acquire Meraki Inc., a privately held networking vendor, for $1.2 billion in cash and retention-based incentives, in an attempt to bring cloud-based network technology to midmarket customers.
Cisco will roll the San Francisco-based company into its Enterprise Networking Group, where Meraki will form the basis of Cisco's soon-to-be-launched Cloud Networking Group, said Rob Soderbery, the enterprise networking group's senior vice president, during a joint Cisco-Meraki investor call about the proposed acquisition. Meraki's technology will help Cisco offer more software-centric products to simplify network management for a greater range of customers while empowering mobile workforces by supporting the bring your own device (BYOD) trend.
"We are bringing Meraki into the new Cisco platform for cloud managed networks, and we are asking the Meraki team to lead this [group],"Soderbery said. "We intend to invest in and build on the Meraki cloud platform to further extend its capabilities and geographic reach across the globe."
Cisco expands reach of cloud-based network offerings
Meraki has developed cloud-based network management technology. It offers wireless LAN access points, security appliances and access layer switches that are all managed by the company's cloud. Its products have been popular among small- and medium-sized businesses (SMBs) and in branch office deployments. Cisco's wireless LAN and networking portfolio is generally designed and priced for larger enterprises. "Together, the Cisco and Meraki portfolios will provide a complete offering to the entire market and transform how midsized businesses -- like retailers, health care organizations and school districts -- build and consume networking technology," Soderbery said.
SMBs want cloud-based network products that are easy to deploy and that can be managed remotely, because their IT departments are typically lean and centrally located, said Paul DeBeasi, research vice president of wireless and mobility at Gartner Inc. Meraki's management interfaces and deployment methods are easy for SMBs to use and navigate -- technology that is not simple for many networking vendors to create on their own, he said.
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Cisco has specialized in delivering advanced networking features and management technologies to large enterprises, but these features are usually too expensive and complex for an SMB with limited funds and IT staff. Meraki brought advanced networking capabilities within reach of SMBs initially with its wireless LAN access points, and later with its switching, security and mobile device management products. Meraki's cloud-based management interface is designed to deliver advanced features that are affordable and easy to use to midmarket customers that are trying to support BYOD, guest networking, application and bandwidth control, and WAN optimization.
Meraki's cloud-based network management platform also offers simplified network operations by streamlining software updates to products. "The acquisition is about offerings that Cisco doesn't have today, and it will really expand their product line and extend their ability to do rapid software development and deployment," DeBeasi said. "The acquisition just makes sense."
Meraki's cloud networking technology will also bolster the vendor's Unified Access platform, which can simplify IT operations by uniting wired and wireless networks, policy and management into one integrated network infrastructure, according to Cisco.
The new Cisco Cloud Networking Group will focus on selling management software to midmarket customers, DeBeasi said, noting that Cisco might also move in additional products designed for the mid-tier market down the line. "Wireless LANs have always had a 'high end' market, and now have a mid-tier and even consumer market. These products are being designed in different ways according to these segments, and Meraki technology is very well targeted to the SMB," he said.
The acquisition is expected to close in the second quarter of Cisco's 2013 fiscal year.