Cisco's penchant for acquisitions is continuing unabated with the $610 million purchase of Viptela, maker of a software-defined WAN (wide area network) system. In part, the move is meant to take a competitor off the table, as Cisco already has some SD-WAN capabilities of its own.
However, Cisco's enterprise SD-WAN offering is on-premises, while Viptela takes a cloud-first approach. Both offerings will be complemented by Cisco Meraki, which provides cloud-based SD-WAN capabilities, but with a market focus on SMBs. Cisco made the case for buying Viptela in a statement:
Viptela provides a compelling SD-WAN solution that simplifies management, increases agility and reduces costs of interconnecting dispersed enterprise networks. Its network management, orchestration and overlay technologies make it easy to deploy and manage SD-WAN.
With this announcement, Cisco will be able to accelerate the path to developing next generation SD-WAN solutions, by combining Viptela's cloud first network management, orchestration and overlay technologies with industry-leading routing platforms, services, and SD-WAN capabilities from Cisco. ... The acquisition of Viptela also supports Cisco's strategic transition toward software-centric solutions that deliver predictable, recurring revenue.
Viptela's selling price isn't as robust as it might initially look. Last year, it was valued at about $900 million, and the current price tag is only half of the $1.2 billion Cisco paid for Meraki in 2012. However, there's no need to shed too many tears for its investors as Viptela has announced only about $110 million in venture capital infusions to date.
The company is led by Praveen Akkiraju, former CEO of Dell EMC's VCE converged infrastructure business and a longtime Cisco executive. Cisco's move to purchase Viptela could be the start of a consolidation wave in SD-WAN, with Versa Networks, Aryaka and VeloCloud just a few potential targets.
At a higher level, Cisco's move to acquire Viptela has a broader meaning, says Constellation Research VP and principal analyst Andy Mulholland.
"The whole concept of what is meant by networking continually changes, both in terms of technology and the role business requires," he says. "Cisco has been an adroit acquirer over many years to stay in the forefront of networking technology, but now the market is moving to a wholly new era."
"Today, the business requirement is for a 'network' of capabilities, with some coming directly from technologies and other, more important ones coming fom new business models," Mulholland adds. "This is an important acquisition, not in terms of size or cost, but by adding innovative capabilities that may shape the technology market toward Cisco and its strengths."
Cisco expects the deal to close in the second half of this year.
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