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What's going on?
Cisco Systems, the tech giant that traditionally made hardware like your old school modem, announced on Monday that it agreed to buy a cloud-based software company for almost $2 billion!
What does this mean?
Cisco is buying BroadSoft, which sells communication and workplace collaboration tools (think: video conferencing). BroadSofts clients include huge telecom companies, like Verizon and AT&T, who then sell the services on to their business customers.
The acquisition is part of Ciscos shifting focus from hardware (like modems and routers) to cloud-based software, which is typically sold as a subscription. The idea is that this will create recurring revenue for Cisco and offset declining demand for hardware.
Why should I care?
The bigger picture: Ciscos traditional networking equipment business is under threat.
When it comes to virtual software-defined networking, Ciscos rivals like VMWare have been making strides. Meanwhile, companies outside the networking industry, like Facebook, have created their own networking technology and they are giving away the designs and software for free. In short, Ciscos leadership as a network provider is under threat, which is partly why its evolving into new products.
For the stock: Cisco has announced seven other acquisitions this year!
Mondays acquisition is part of a slew of purchases Cisco has made this year in an attempt to accelerate its shift from hardware to software. These include the $3.7 billion acquisition of AppDynamics, a business monitoring software provider and Perspica, a company that uses machine-learning to analyze data.
Originally posted as part of the Finimize daily email.
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