It’s a pretty safe bet that Meraki wants to lay a big wet kiss on Cisco right about now. The networking giant is laying out $1.2 billion in cash for the young cloud networking (primarily wireless) company, and that’s a pretty big deal for a 6 year old company with a $100 million annual run rate. Cisco announced the deal to analysts last night and followed up with a conference call this morning. It’s safe to say that the kiss is being reciprocated — Cisco is pretty jacked about the acquisition, too.Image source: TechCrunch
During the conference call, Rob Soderbery, senior vice president of Cisco’s Enterprise Networking Group, repeatedly mentioned Meraki’s positioning in the mid-market. Cisco desperately wants and needs to offer a cloud-managed WLAN solution, but hasn’t had much success breaking into that space on its own. Cisco also recognizes that margins on the software side and the recurring revenue model of cloud services are where it needs to move.
While the price tag is hard to wrap your head around, this is clearly a strategic purchase for Cisco. It was emphasized on the conference call that this is not an opportunistic acquisition, but a longer-term strategic acquisition. For Cisco, the move is multi-faceted — get a recurring revenue cloud managed solution, get into higher margin software, and offer a viable mid-market solution to grow share in the fastest growing segment of the market. For Meraki, it’s $1.2 billion — need I say more?
For Meraki’s current customers, it’ll be business as usual for the next 6 months or so. For new buyers, uncertainty will likely hinder Meraki’s growth for 6-12 months. Based on Info-Tech’s Wireless LAN Vendor Landscape published earlier this year, this could be a match made in heaven.