(CSCO) Cisco Systems to Purchase Cariden for $141M

Cisco Systems Inc. (CSCO) recently announced its plan to buy privately-held Cariden Technologies, Inc. for $141 million in cash. The acquisition is expected to close in the second quarter of 2013, subject to fulfillment of certain customary closing conditions.

California-based Cariden Technologies’ traffic management solutions help service providers to optimize the operation of their networks. Its main customers include Verizon Communications Inc. (VZ), Deutsche Telecom, SingTel and Swisscom.

Upon the completion of the deal, Cariden will become a part of Cisco’s Service Provider Networking Group unit, augmenting Cisco’s offering to service providers. The integration of Cariden’s network software will further Cisco’s strategy of increasing its software-centric solutions to streamline network management. The deal will allow the company to expand and differentiate its offerings with regard to networking infrastructure.

Management stated that the acquisition will enable telecom service providers to improve the visibility, programmability and efficiency of converged networks, ultimately growing their businesses. Additionally, the deal supports Cisco’s Open Network Environment strategy, also known as Cisco ONE, which aims to help businesses increase infrastructure agility, simplify operations and instill greater application visibility and awareness.

Cisco Systems is a leading provider of IP-based networking and other products. Although Cisco is taking steps to lower its cost structure by reducing headcount, it is not ignoring growth opportunities.

This is Cisco’s third acquisition in November and is in line with its growth strategy. Earlier this month, Cisco announced its intention to acquire Meraki and Cloupia for $1.2 billion and $125 million, respectively, as part of its cloud and networking expansion strategy.

The company’s first-quarter earnings of 44 cents beat the Zacks Consensus Estimate by 3 cents. Reported revenue was up 5.5% from the year-ago quarter.

We believe that these acquisitions will broaden Cisco’s customer base and network offerings, providing the company with a significant competitive edge over its peers, namely Juniper Networks, Inc (JNPR), Hewlett-Packard Company (HPQ) and F5 Networks, Inc (FFIV), which have been picking up market share.

Cisco has a Zacks Rank #2 (Buy).

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