Cisco Systems (Nasdaq: CSCO) announced yesterday its intent to acquire Viptela Inc., a San Jose-based startup developing software-defined wide area network (SD-WAN) technology, which enables businesses to improve access between their corporate data centers and branches.
Cisco will acquire Viptela for $610 million in cash and assumed equity awards.
Viptela raised $108 million in venture funding, and according to PitchBook, was valued at $900 million by its investors last year.
Pending regulatory proceedings, the deal is expected to close in the second half of 2017.
Adapting to a Changing Landscape
M&A Mastery: With nearly 200 deals under its belt since its founding and over 20 since 2015 alone, Cisco has developed an acquired taste for strategic buys. Viptela marks its second purchase of 2017, following its eleventh hour purchase of business software company AppDynamics for $3.7 billion.
Rocky Road: While Viptela’s advanced software gave it a near-unicorn valuation, the realities of intense competition from startups like Aryaka, CloudGenix, and Cisco-backed VeloCloud, in addition to internal company difficulties, made a quick sale the most appealing path forward.
Shift to Software: Cisco’s penchant for identifying and integrating valuable targets exemplifies today’s trend of larger companies turning to M&A to remain competitive. As the largest networking company in the world, Cisco is positioned favorably to invest in multiple growing technologies, from cloud to Internet of Things. As competitors struggle to differentiate themselves through hardware performance, Cisco is pressing into rapidly changing, newer industries.
Deepening Integration: This transaction is a homecoming of sorts — Viptela’s founders include former Cisco engineers. Post deal, a majority of Viptela’s nearly 120 employees will join Cisco.
Another Entrance: As larger players continue to fight for a bigger share of the cloud market, smaller startups and hardware-based companies risk being edged out. This acquisition provides Cisco yet another entrance into the lucrative market, allowing the company access to new customers.
For more information about this transaction, click here to read the press release.
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