Cisco has announced its intention to acquire cloud-networking firm Meraki, which builds products for SMBs (small- to midsize businesses). The deal will cost Cisco roughly $1.2 billion in cash and “retention-based incentives,” and close in the second quarter of the company’s fiscal year 2013.
Meraki boasts a number of cloud-related offerings, from Ethernet switches and security appliances to a mobile device management platform and wireless LAN. Founded in 2006 and subsequently funded by a number of prominent firms, including Sequoia Capital and Google, Meraki touts itself as a shop for “easy-to-manage wireless, switching, and security solutions.” Business segments include supporting Bring Your Own Device (BYOD) shops, retail analytics, and massive networks managed from a central point.
“When Cisco approached with an acquisition offer a few weeks ago, our initial reaction was to politely say ‘thanks, but we’re planning to do our own thing and take Meraki public,’” Meraki CEO Sanjit Biswas wrote in a letter to employees. “It turned out that was exactly why they were interested in talking to us—over the past six years, we’d developed an innovative product as well as sales model that was indeed our own thing and unique in the market.”
According to Biswas, Cisco wants to distribute Meraki’s “unique” offerings through its massive sales channels. “Cisco appreciates the way in which we develop innovative products: by focusing on our customers and quickly trying new ideas in both software and hardware,” he wrote. “They’d like to see us continue to release new features and products in the years ahead, and hopefully ‘cloudify’ other Cisco products.”
As such, Meraki will apparently form the core of a Cisco “Cloud Networking Group” based out of San Francisco. The company’s three founders will remain in place.
Meraki is Cisco’s second big buy in less than a week. On Nov. 15, the company announced it would acquire Cloupia, a privately held software company that automates converged data center infrastructure, allowing enterprises to simplify the deployment and configuration of physical and virtual resources from a single management console. However, at $125 million in cash and retention-based incentives, that deal was much smaller than the one for Meraki.
Cisco realizes that assets from companies such as Meraki will give it an advantage as more and more companies turn to the cloud for their IT infrastructure needs. “ We don’t miss market transitions,” Cisco CEO John Chambers said during a recent earnings call. “We will get it right ahead of people, either cloud and where we’re today in the data center, or IP telephony or the role that our business models are going change in search matter, where we very quickly adjust within it.”