Cisco to Acquire Acano: Can It Outpace Microsoft and Google?

Cloud Computing Update: Cisco Focuses on Cloud-Based Initiatives

(Continued from Prior Part)

Cisco added one more videoconferencing company

Technology and globalization go hand in hand. The interconnected economy grows dependency among business enterprises and allows them to collaborate with each other beyond their geographical locations.

Videoconferencing facilitates seamless interaction among these enterprises by removing the barriers between them while maintaining strong communication between internationally located clients.

Cisco plans to acquire European videoconferencing startup Acano for $700 million in cash. Acano is involved in the development of video infrastructure and collaboration software that allows end users to connect video systems from different vendors across both cloud and hybrid environments.

Before this acquisition, Cisco already had a formidable portfolio of companies. These included videoconferencing company Tandberg ASA, which Cisco acquired for $3.3 billion in 2010, and web meeting service WebEx Communications, which Cisco acquired for $3.2 billion in 2007.

Revenue growth from core business falls

Cisco generates the majority of its revenues from its core switching and routing business, but over the past few quarters, growth has been sluggish for this line of products. To overcome the situation, Cisco is expanding its product line to work in collaboration and security.

In 3Q15, Cisco’s revenues from its switching and routing business constituted 46% of total revenue generated, whereas its work collaboration unit constituted 9%.

Rowan Trollope, vice president and general manager of Cisco’s work collaboration unit, said that many opportunities remain unfilled for work collaboration as enterprises are switching from traditional conferencing and phone systems to face-to-face video conferencing.

Cisco is facing tough competition from technology giants such as Google’s Hangouts service and Microsoft’s (MSFT) Skype. Microsoft is planning to expand its videoconferencing space in 2016 by introducing the Microsoft Surface Hub device for conferencing. This may give Cisco some competition in the conferencing hardware space.

The SPDR S&P 500 ETF (SPY) is a portfolio of 507 stocks, of which the top four stocks Apple (AAPL), Microsoft, ExxonMobil (XOM), and General Electric Company (GE) constitute 3.6%, 2.3%, 1.9%, and 1.7%, respectively.

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Browse this series on Market Realist:

• Part 1 - SKYY’s Weekly Performance Remained High

• Part 3 - How Will Cisco Benefit Cloud Service Providers?

• Part 4 - Analyst Recommendations for Cisco