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Cisco Leverages Meraki to Grow its Wireless Business

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Meraki is helping Cisco’s wireless business grow

Cisco’s (CSCO) wireless business caters to the ever-growing demand for wi-fi networks. The rapid growth of wireless devices such as PCs, smartphones, and tablets have enabled the increasing demand of wi-fi networks both at work and at home. This increase also reflects in Cisco’s wireless segment financials. As the chart below shows, Cisco’s year-over-year revenue growth for its wireless segment has continued to accelerate over the last few quarters.

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Cisco’s wireless business achieved revenue growth of 18% in the last quarter. Cisco credited this growth to Meraki. Cisco acquired Meraki in November 2012 for $1.2 billion. Meraki’s technology provides a means to control wi-fi networks through the cloud. During the company’s fiscal 2Q15 earnings call, Cisco’s management mentioned that its cloud networking business in Meraki grew at year-over-year rate of 100%, with an annualized revenue run rate of $400 million.

Aruba Networks is growing its wireless business fast

The wireless market is becoming competitive each day. Recently, HP (HPQ) acquired Aruba Networks (ARUN) for $3 billion. Aruba makes wi-fi network systems for enterprises, hotels, and universities. According to a report from IDC, Cisco, Aruba, Ruckus Wireless (RKUS), and HP are the top four players in the enterprise wireless local area network market. However, after acquiring Aruba, HP has become an important player in the enterprise wireless network market, thereby increasing competition with Cisco.

In the next part of this series, we’ll discuss in detail HP’s acquisition of Aruba. If you’re bullish about Cisco, you can invest in the PowerShares QQQ Trust, Series 1 (QQQ). QQQ invests 3.6% of its holdings in Cisco.

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