It's a Walk in the Clouds for Cisco as Plans to Buy Meraki Emerge

The cloud is where the opportunities start for a lot of companies these days, and for Cisco (News - Alert)--who already has a pretty pronounced presence as far as the cloud goes--they'll be taking one step farther into the cloud as word emerged about Cisco's plan to buy Meraki, a cloud networking firm.

Part of a larger overall strategy for Cisco, the Meraki buyout plan will come at a hefty cost of $1.2 billion in cash for Cisco, and will likely be settled by the early going of next year. Reports indicate the deal is likely to be finished by the second quarter of the 2013 fiscal year for Cisco, and Cisco's fiscal year is half over with the end of January.

So what drove Cisco's interest in Meraki? There were, reportedly, several factors that made Meraki an attractive buyout target, like its positive cash flow, its current personnel roster of 330 employees and its $100 million in bookings. Plus, there was something of a matter of timing, as Cisco approached Meraki at a time when they were considering taking their stock public. Originally, Meraki rejected Cisco's first offer, but later--after "several weeks of consideration" according to Meraki's chief executive Sanjit Biswas (News - Alert)--decided to take Cisco up on its buyout. 

Perhaps the biggest driver of interest for Cisco, though, is that Meraki is operating in a market where there are several competitors, yet Cisco itself doesn't have much of a presence. Specifically, Cisco's buyout of Meraki will allow Cisco to offer an array of alternatives to standard Wi-Fi deployment, which is the focus of smaller firms like Aruba Networks and Ruckus Wireless (News - Alert). Cisco previously was soft in that area, but the Meraki buyout will give them a very big head start on bringing out their own line.

Considering that Ruckus Wireless took a rather big dip on its recent IPO--recent numbers for Aruba, meanwhile, were much better--it would be a safe bet to say that more slumping is on the way for them as a major name like Cisco getting involved in the market is a recipe for trouble. It's not necessarily the end for companies like Ruckus and Aruba, but they're going to have to find a way to differentiate themselves from the likely "halo effect" that products with the Cisco name on them will have in the marketplace.

Still, more competition is always a welcome sight for those who would buy such equipment, and having plenty of places to go means more to consider in terms of pricing and warranties and the like, which in a soft economy are vital value-adds that make prudent purchasing decisions a bit easier for those looking to shell out the cash.

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