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Business Briefing

Cisco Buys Cloud-Networking Leader Meraki for $1.2 Billion

Cisco Buys Cloud-Networking Leader Meraki for $1.2 Billion
November 19, 2012 11:59AM

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Formed in 2006 by MIT PhD candidates, Meraki was funded by Sequoia Capital and Google. Meraki says it now has 10,000 customers using its cloud managed products including wireless LAN, Ethernet switches, security appliances, and mobile device management. The company name Meraki is Greek for doing something with passion and soul.

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Cisco on Monday announced its latest blockbuster acquisition. The networking giant intends to buy privately held cloud networking leader Meraki for $1.2 billion in cash and retention-based incentives.

San Francisco-based Meraki (pronounced may-rah-kee) offers midmarket customers on-premise networking solutions that can be centrally managed from the cloud. Meraki's cloud-based technology offers customers Wi-Fi, switching, security and mobile device management (MDM). Meraki solutions support BYOD (bring your own device) environments, guest networking, application control, WAN optimization, application firewalls, and other advanced networking services.

"The acquisition of Meraki enables Cisco to make simple, secure, cloud-managed networks available to our global customer base of mid-sized businesses and enterprises. These companies have the same IT needs as larger organizations, but without the resources to integrate complex IT solutions," said Rob Soderbery, senior VP of Cisco's Enterprise Networking Group. "Meraki's solution was built from the ground up, optimized for cloud with tremendous scale, and is already in use by thousands of customers to manage hundreds of thousands of devices."

IT's Mobile-Cloud Era Transformation

Cisco has been chronicling the IT industry's transformation in the mobile-cloud era and working to meet new networking and business enablement challenges with cloud networking as well as device and security services. Meraki is part of that effort. Cisco said Meraki complements and expands its strategy to offer more software-centric solutions to simplify network management, help customers empower mobile workforces, and generate new revenue opportunities for partners.

Cisco said the acquisition will expand its network offerings by providing scalable solutions for midmarket businesses. Cisco also expects Meraki to strengthen its Unified Access platform, which works to make IT more responsive to business innovation by simplifying IT operations and uniting wired and wireless networks, policy and management into one integrated network infrastructure, unlike other competitive offerings.

Meraki was founded by members of MIT's Laboratory for Computer Science. Meraki combines a high-velocity software development methodology with a tightly linked inside sales and channel model that will form the new Cloud Networking Group. The firm has offices in New York, London and Mexico. The acquisition is expected to close in the second quarter of Cisco's 2013 fiscal year.

Meraki's Front-End Connection

Zeus Kerravala, principal analyst at ZK Research, said there is a market for an alternative type of deployment model. He pointed to Aruba's success with its proprietary solution, dubbed Instant, as one example.

Most of the start-ups in the space, including Meraki and Aerohive, have all built controller-less access solutions, Kerravala told us. "Clearly there's a market for controller-less solutions and Cisco didn't have one. Even with Cisco's excellent sales force, I think they were getting shut out at some companies looking for an alternative solution. That's one of the reasons this acquisition was appealing."

So the question then is why Cisco decided to acquire Meraki versus Aerohive. Most people think of Meraki as a Wi-Fi vendor, but Kerravala said Meraki is better described as a cloud-managed vendor that happens to sell Wi-Fi as its primary product.

"Meraki also has cloud-managed switches and cloud-managed security devices. If you put your long-term hat on, Cisco is interested in the cloud-management capability for the rest of its product line," Kerravala said.

"Cisco rolled out the onePK product," Kerravala said, referring to the One Platform Kit which Cisco introduced in June as part of its Open Network Environment solution. OnePK provides APIs for developers across Cisco operating systems.

And, Kerravala said, Cisco already has the "back-end interface to allow cloud management of their switches. What they don't have is the front-end tool. Meraki gives them that."

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