Cisco Acquires Meraki for $1.2 Billion

Is a cloud worth $1.2 billion? Cisco thinks so. In order to allow its customers to compute in the cloud—storing software in remote data centers accessed via the Internet rather than through individual machines—Cisco Systems, Inc. announced Nov. 18 it is buying Meraki Inc. for $1.2 billion. Meraki, a San Francisco-based privately held company, offers its customers Wi-Fi, switching, security and mobile device management all centrally managed from the cloud. The acquisition will form Cisco’s new Cloud Networking Group.

“Meraki’s solution was built from the ground up optimized from cloud, with tremendous scale, and is already in use by thousands of customers to manage hundreds of thousands of devices,” Cisco Enterprise Networking Group senior vice president Rod Soderbery said in a statement.

Cisco may have already been the world’s largest producer of computer networking gear, but the Maraki purchase will allow it to access the wireless networking market, especially among small- to mid-sized businesses. Meraki already holds clients such as Applebee’s, Starbucks, a variety of school districts, as well as state and local governments.

“(This) moves us further towards the software and cloud-based business model,” Soderbery said. “The midmarket is growing faster than large enterprises and Cisco has a relatively low share. Additionally the margin and growth economics of the Meraki business and the mix of product and services fit well into the Cisco financial model.

“This is not just a product technology or talent acquisition,” Soderbery added. “We are bringing Meraki in as a new platform was in Cisco for cloud managed networks.”

Meraki was founded in 2006 by members of MIT’s Laboratory for Computer Science and currently has about 330 employees. According to the company’s Web site, it had originally planned to remain independent, but by joining Cisco, Meraki will finally achieve its goal of hitting $1 billion in annual revenue.