Why Cisco (NASDAQ:CSCO) Is Buying IoT Company Jasper

  • Cisco recently announced its intent to acquire Jasper, a private cloud-based IoT service platform, for $1.4 billion.
  • With Jasper, enterprises can connect any device and manage the connectivity of IoT services through a SaaS platform.
  • According to Gartner, the IoT world of permanently online interconnected devices is likely to grow spectacularly.
  • Cisco could leverage its leadership in the connectivity market and become one of the top players in the emerging IoT market.

Cisco (NASDAQ:CSCO) announced its intent to acquire Jasper, a privately held company based in Santa Clara that delivers a cloud-based IoT service platform to help enterprises and service providers launch, manage and monetize IoT services on a global scale.

"I am excited about the opportunity for Cisco and Jasper to accelerate how customers recognize the value of the Internet of Things,” said Cisco CEO Chuck Robbins. "Together, we can enable service providers, enterprises and the broader ecosystem to connect, automate, manage, and analyze billions of connected things, across any network, creating new revenue streams and opportunities."

Cisco leads the market for routers and switches that manage the flow of data over the Internet and corporate networks. Cisco products have been so successful that the company is globally identified with connectivity hardware and services. Now, Cisco wants to lead the next wave of pervasive connectivity - the Internet of Things (IoT).

The IoT world will be full of permanently online, interconnected devices. Physical objects will carry embedded computers that will manage their functions, automatically connect to the Internet via WiFi and cellular data networks, and execute queries and commands. In the IoT world, you will finally be able to google the keys that you have lost somewhere.

CNBC notes that, as businesses look into the future, seemingly everything is connected. From cars, watches and drones to the heating, lighting and refrigeration systems throughout offices and stores, data is flowing and being captured everywhere, and Cisco is at the center of the network as the world's leading provider of routers and switches.

With Jasper, enterprises can simplify and automate the management of IoT services across a wide range of connected products, connect any device over the cellular networks of the top global service providers, and then manage the connectivity of IoT services through Jasper’s Software as a Service (SaaS) platform. The acquisition will bring together connectivity, security, automation, and real-time insights for a complete IoT service solution. Under the terms of the agreement, Cisco will pay $1.4 billion in cash and assumed equity awards, plus additional retention-based incentives.

"I'm incredibly excited about this news and believe it will help accelerate the digitization journey of our enterprise customers," said Cisco VP of Corporate Development Rob Salvagno in a Cisco blog post. "Jasper understands that enterprises making connected products need a simple, scalable and interoperable IoT service platform that can support the billions of connected devices estimated to be connected to the network in the next five years. Together, Cisco and Jasper will deliver exactly that to our customers."

Cisco Investments is one of the most active IoT investors globally, with over 50 companies in its portfolio. "Cisco views Jasper as a unique IoT service platform that is disrupting a massive market with strong strategic alignment with Cisco," added Salvagno. "Jasper represents the largest platform of scale in IoT today with over 3500 enterprise customers and 27 service providers across 100 countries."

"Jasper was founded over a decade ago on the premise that through cloud software we could help enterprises realize the power of IoT," said Jasper CEO Jahangir Mohammad in a Jasper blog post. "Since then we’ve been helping enterprises transform into connected service businesses with all of the associated benefits: new customer experiences, automated operations and new recurring revenue streams. As we become part of Cisco, we shall carry this mission with us." Mohammad added that IoT has become a business imperative across the globe and enterprises in every industry need integrated IoT solutions.

According to Gartner, the IoT will support total services spending of $235 billion in 2016, up 22 percent from 2015. The number of connected devices in use globally will quadruple by 2020 to over 20 billion. In terms of hardware spending, consumer applications will amount to $546 billion in 2016, while the use of connected things in the enterprise will drive $868 billion in 2016.

Other top tech companies that are betting on the growth of the IoT include IBM (NYSE:IBM), which is developing a framework to bring connected cars to the IoT cloud, General Electric (NYSE:GE), with a renewed focus on the IoT-enabled Industrial Internet, and Microsoft (NASDAQ:MSFT).

Cisco's stock has been on the rise since the announcement of the Jasper deal. It seems likely that Cisco, strengthened by the acquisition of Jasper, could be able to leverage its leadership in the connectivity hardware and services market and become one of the top players in the emerging IoT market. That would ensure the continued growth of Cisco stock in the mid and long term.

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Comments on this article and CSCO stock

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jasonl35
bullish
Great pick Cisco, you would not have been able to build a division like Jasper internally in a reasonable amount of time.

Jason Lebrecht
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Do share this awesome post