Exclusive: Cisco Buys Meraki For $1.2B, Will Attack Midmarket

Cisco will acquire networking startup Meraki, CRN can confirm, boosting what Cisco offers for cloud-based management of wired and wireless infrastructure and leading to the creation of a new business group within the networking titan.

Reached by CRN Sunday afternoon, Rob Soderbery, senior vice president and general manager, Enterprise Networking Group, confirmed details of the acquisition, which is for $1.2 billion cash.

Soderbery said Cisco will use Meraki's management platform and products to go after SMB and midmarket customers seeking a cloud-based solution to networking. Not only that, he said, but Cisco intends to lead with Meraki in that lucrative market segment, even though it has no plans to abandon the Cisco IOS-based products it has for the segment already.

"This provides us a new way to to serve our customers in the midmarket," Sodebery said in an exclusive interview with CRN. "We felt the Meraki platform provided a simple, secure networking solution for these customers -- ideal for the SMB, and complementary to the feature-rich Cisco enterprise networking solutions. This is not just a single product, or technology, or talent acquisition. These guys have built a highly scalable, multitenant cloud service. This is a full, cloud-managed networking offer and we're embracing Meraki's entire strategy."

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Rumors about Cisco acquiring Meraki splashed across Twitter Sunday afternoon following what appeared to be a post to Cisco's corporate Platform blog announcing the deal. That blog post was swiftly removed, but the headline still appeared in RSS feeds such as Google Reader and in Google search history. Clicking it led to a "Sorry, this page does not exist" message.

Several Cisco-centric blogs, however, including Tom Hollingsworth's Networking Nerd blog, captured what appeared to be a cached version of the original Cisco corporate blog post, written by Cisco's Hilton Romanski, vice president of corporate development, and offering what appeared to be details of the acquisition.

Cisco finally confirmed the move late Sunday afternoon East Coast time after several queries from CRN.

Founded in 2006 and based in San Francisco, Meraki began as a wireless LAN specialist, but in 2010 added network security appliances to its lineup and, earlier in 2012, further expanded into Ethernet switching. It was considered an IPO candidate, having taken in about $80 million in venture funding in the past six years and growing its customer base to about 20,000 worldwide.

Meraki's hook is that its customers use the same hosted management software, set up and controlled using an Internet-accessible dashboard, for all of its various products. The company sells about 98 percent through solution providers and has more than 1,000 global partners.

Meraki CEO Sanjay Biswas was recently featured in CRN's Top 100 Executives of 2012 list.

Meraki will join Cisco as its new Cloud Networking Group, Soderbery said, reporting up to Sujai Hajela, vice president and general manager, Wireless Networking Business unit. Biswas will become vice president and general manager of that unit, and Meraki's full team will be preserved, and also remain in San Francisco.

"These guys are terrific entrepreneurs," Soderbery said. "We couldn't be more pleased to have them join the company."

Meraki technologies will be leveraged in Cisco's own, but Soderbery said the plan is not to take bits and pieces of it to build into Cisco's platforms. Cisco intends to preserve the Meraki platform as it's run now and lead with that solution for SMB and midmarket customers wanting cloud-managed networking and security appliances.

"Meraki has really optimized for a narrower set of features and capabilities," he said. "They've done a lot to reduce TCO. We will lead with Meraki for the midmarket."

Meraki declined comment to CRN.

Soderbery said Meraki has an attractive channel story, too.

"The channel's been an important part of their go-to-market," Soderbery said. "We intend to feed the channel go-to-market engine and intend to continue to execute on that."

Soderbery added that it was Cisco that sought out Meraki, and that many customers still weren't aware of what Meraki had done since garnering buzz as a cloud-managed wireless LAN company years ago.

"They have WAN acceleration, Layer 4-7 services, application firewalls -- this is a much richer platform than what people who might have looked at them in the past saw was there," he said. "They have 20,000 customers and more than 100,000 devices under management. We absolutely felt this was a strategic acquisition for Cisco."

After a relatively slow 2011, Cisco this year returned to its traditionally brisk pace of M&A and on last week's first-quarter earnings call CFO Frank Calderoni said that would continue. Among the company's recent acquisitions have been NDS Group, vCider, ThinkSmart, Virtuata and Cloupia.