Cisco’s acquisitions for software and services exposure
In February 2016, Cisco Systems (CSCO) announced the acquisition of Jasper Technologies for $1.4 billion. Jasper provides an IoT (Internet of Things) platform that creates, manages, monetizes as well as automates IoT services for Internet-connected devices. In late 2015, Cisco announced the acquisition of Acano, which provides collaboration infrastructure and conferencing software, for $700 million. This acquisition was completed in February 2016.
Prior to CliQr Technologies, Cisco acquired Piston Cloud in 2015. Piston Cloud, a cloud service management software company, provides OpenStack private cloud distribution, which is designed for automated deployment, security, and interoperability within public clouds.
In 2014, Cisco also acquired Metacloud. Its strategic acquisition of recently announced CliQr Technologies, as well as Piston and Metacloud, will enhance Cisco’s Cloud Services architecture, which is built on OpenStack open-source software. (Please read OpenStack Is Attracting a Lot of Interest and Investments to know more.) According to Steven Milunovich, an analyst with UBS, “most of Cisco’s recent acquisitions have been software-based as the company seeks to increase its software/services revenue content higher from its current 28%.”
Cisco’s diversification strategy looks promising
Cisco has employed a strategy of diversifying its operations by focusing more on SDN (software defined networks) and security services and by reducing its dependency on specialized routers and switching equipment. In fiscal 2Q16, Cisco’s Security segment rose by 11% to $462 million.
To improve its position in the networking space, in November 2015, Cisco Systems and Ericsson (ERIC) announced a strategic partnership that could help both companies realize synergies of $1 billion by 2018. In fiscal 2015, Cisco announced acquisitions of Lancope, OpenDNS, Pawaa Software, Portcullis, and ParStream to boost its position in security, data analytics, and video space. Given the growth in these segments in recent fiscal 2Q16, it appears that Cisco’s strategy is on its way to yielding results.
To promote its presence in video cloud space IBM acquired Clearleap, a video services company. Clearleap’s technology has been put to use by Time Warner’s (TWX) HBO, Sony Movie Channel, BBC America, and Time Warner Cable (TWC).
Investors looking to gain exposure to Cisco Systems can consider investing in the iShares Core S&P 500 ETF (IVV), which has an exposure of ~7.5% to application software and invests ~0.8% of its total holdings in Cisco.