Cisco Shells Out $1.2B for Meraki

Only days after unveiling the acquisition of cloud management software vendor Cloupia, Cisco Systems Inc. (Nasdaq: CSCO) has announced a deal to buy "cloud networking" specialist Meraki Networks Inc. for US$1.2 billion in cash.

Meraki has been developing its centralized, remote management capabilities since 2006 and now has a range of tools and products (Ethernet switches, security devices, Wi-Fi access points) that enables network managers to run their networks using a central, remote (or "cloud") management platform.

Meraki, which has 330 staff, more than 10,000 customers and an order book currently running at an annual rate of about $100 million, will form the core of Cisco's new Cloud Networking Group once the acquisition is complete. That is expected to happen some time in the next couple of months. According to a letter sent to staff by CEO Sanjit Biswas, Meraki had been planning an IPO but the recent takeover offer from Cisco was too good to turn down. The company had raised more than $80 million from its investors, which include Google (Nasdaq: GOOG), Sequoia Capital and DAG Ventures Management .

Why this matters

The centralized management of networks is the infrastructure and application control model that looks set to dominate in the future, so it makes sense that Cisco would want to maintain its role as a key provider of networking capabilities to enterprises and service providers by acquiring key players in this space.

What's interesting about Meraki, though, is its long-time focus on the remote management of wireless networking capabilities. Those capabilities not only make its technology increasingly relevant in an enterprise world that is grappling with the challenge of mobile security and access rights in the bring-your-own-device (BYOD) age, but make it even more relevant for Cisco as it targets mobile operators with its carrier Wi-Fi and small-cell products.

And given that Cisco has also recently acquired Wi-Fi traffic analyzer startup ThinkSmart, it seems very likely that the networking giant might still be looking to flesh out its wireless management and cloud networking portfolio further with other targeted Service Provider Information Technology (SPIT) acquisitions.