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Cisco will pay $1.2 billion in cash for its second acquisition in less than a week.
On Nov. 18, the networking giant said it would buy cloud networking startup Meraki; the news came after Thursday’s announcement of the Cloupia purchase. Cisco plans to target mid-market companies that need help managing their Wi-Fi networks remotely. As more employees bring their own mobile devices to corporate networks, businesses need helping managing security and wireless access points over the Internet.
Cisco is getting more aggressive when it comes to buying software companies. The company built itself on hardware sales but, like Polycom and Avaya, is turning to software to take advantage of recurring revenue opportunities and to profit from cloud computing demand.
J.P. Morgan analysts said they understand the rationale behind the deal but question the price, since Meraki has a number of rivals. But a JMP Securities LLC analyst said the valuation reflects the Wi-Fi market’s compelling growth prospects. To that point, Meraki CEO Sanjit Biswas told staffers in a memo the firm expects about $100 million in bookings this year and its worker ranks have risen from 120 to 330.
Meraki has offices in New York, London and Mexico. It was founded in 2006 by doctoral candidates from Massachusetts Institute of Technology, and its financial backers include Google and Sequoia Capital.
Cisco said the transaction should close in the second quarter of next year.