Cisco Systems Inc. today announced the acquisition of Sheer Networks Inc., a developer of network and service management products, which could lead to lower operational costs and products that are easier to manage.
The networking giant will pay approximately $97 million in cash and assumed options for the privately held San Jose, Calif.-based company. Cisco said the price may increase by up to $25 million if Sheer Networks reaches particular development and product milestones.
Sheer's Dynamic Network Abstraction (DNA) product offers a real-time, virtual representation of a network's configuration, which helps to ease the management of complex networks that have multiple domains and equipment from multiple vendors.
Joel Conover, principal analyst with Sterling, Va.-based research firm Current Analysis, said the significance of Cisco's acquisition of Sheer networks lies in Cisco's network management strategy.
"Cisco is well known to have a poor and generally complex offering when it comes to network management," Conover said. "It has also said publicly that it is going to invest heavily in network management to better address this deficiency. This would be one form of investing."
David Willis, vice president with Stamford, Conn.-based research firm Meta Group, said because Cisco delivers a wide range of products, integrating them is a complex task.
Plus, Willis said, Cisco has numerous competitors in the commodity switching market, such as Hewlett-Packard Co. and Huawei Technologies Co. Ltd., but it can compete in this space if there's proof that an end-to-end Cisco network is less complicated and less expensive to run.
Willis said this acquisition will result in two main benefits for Cisco customers: easier network management and lower operational cost.
Conover said there will be immediate and long-term benefits from Cisco's acquisition of Sheer Networks.
"The primary benefit will be lower cost for provisioning and deploying new services and infrastructure in large networks," he said. "This also gives Cisco a flexible base platform for launching new network management solutions down the road."