Cisco Systems Inc. (Nasdaq: CSCO) continues its rampant attention to segments connected to its cloud and networking channels with a $180 million proposal for virtualization software and services vendor Composite Software.
Cisco pointed specifically to Composite’s virtualization software bringing along API, cloud and data unification enhancements to its Smart Services and Unified Computing System. In addition, Composite’s virtualization software would be combined with the integration platform of another recent Cisco acquisition, SolveDirect. Hilton Romanski (pictured), Cisco VP and head of business development, wrote in a blog on the proposed deal: “The proliferation of traditional and new data sources plus the movement of data to the cloud complicate a company’s ability to access all of its data assets. This creates an important need to complement traditional data warehousing by providing a real-time, consolidated logical view of data, better known as data virtualization.”
In the deal, Cisco pitched $180 million in cash and retention-based incentives for all shares of Composite. The deal is subject to closing conditions and is expected by Cisco to close in its 2014 Q1. After close, Composite employees will report to the Cisco’s services team, which includes its Services Platforms Group and its Integration Brokerage Technology Group.
Cisco has made a number of big-splash deals over the last year. (See "Cisco Acquires Intucell for $475M" and "Cisco to Buy JouleX for $107M") Several deals were related to cloud and networking, including the buyout of Meraki late last year. Earlier this year, Cisco reported earnings gains in its networking data sector, even as its market capitalization and global fiscal clout ranking slipped over the past few years.
Noel Yuhanna, principal analyst at Forrester Research, called the proposal “a lot different” than others Cisco has made of late because of its focus on data, “a missing piece in Cisco’s framework.”
“There is no intelligence built-in that tells the routers that some data needs higher priority than others or needs to travel in another location before reaching its destination,” says Yuhanna. “The data intelligence piece is missing. [Composite’s virtualization software] knows what data is important, how the data needs to be transformed and routed and which data needs higher priority.”
Ted Friedman, an analyst at Gartner Research, says at the crux of the proposed deal is an “interesting” opportunity for Cisco to match its network and cloud know-how with Composite’s understanding of data access and provisioning to meet a growing demand for cloud-based analytics. However, he warns that the information management space learning curve in store for Cisco “could dampen Composite’s nice run of growth.”
“Cisco will have to quickly learn what the whole IM and analytics space is about, and start to engage a very different audience that what is has done in the past,” Friedman says.
More than a decade after it was founded in San Mateo, Calif., Composite has expanded its flagship virtualization platform through more than six iterations with related discovery and monitoring solutions and services. Privately-held Composite has been vocal on the virtualization front, authoring books on the subject and drawing connections to BI and big data, along with crafting solutions with big names like the New York Stock Exchange (which was also noted in the blog by Romanski). CEO Jim Green and other execs carry leadership backgrounds in enterprise integration vendor webMethods prior to that company’s buyout by Software AG in 2010.
Justin Kern reports for Mergers & Acquisitions' sister publication Information Management.