Cisco Expands Intercloud Capabilities With Piston Cloud Computing Buy

Cisco (NASDAQ:CSCO) recently announced its intent to acquire Piston Cloud Computing, a four year old startup offering OpenStack cloud distribution. Cisco stated that this acquisition will help improve product, delivery and operational capabilities of its Intercloud services including cloud automation and scale. Cisco helped fund an $8 million Series B round for the company in 2013 and is listed as a principal investor. ^{[1] [2] [3]}

Cisco’s interest in acquiring Piston follows its recent acquisition of private cloud provider Metacloud and should help bolster its global Intercloud platform and architecture. Cisco’s Cloud Services architecture is also based on OpenStack open source software and is designed to help customers easily and securely use data across both private and public clouds. The acquisition is likely to provide a boost to Cisco’s plans to build the world’s largest Intercloud, which is a secure network of globally distributed and remotely managed clouds capable of meeting growing customer needs, especially as part of the Internet of Everything (IoE). ((Acquisition of Private OpenStack Cloud Service Company Accelerates Cisco’s Intercloud Strategy, Cisco, September 17 2014))

Intercloud is part of the company’s Data Center division, which has witnessed rapid sales growth in the last few years. Divisional sales grew by about 60% year-over-year in FY2013 and 27% in FY2014 on the back of solid expansion in the company’s Unified Computing System products as well as cloud offerings. Rising demand for these products helped divisional sales grow over 25% in the first three quarters this fiscal year to $2.34 billion.

We have a $27 price estimate for Cisco, which is about 10% below the current market price.

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Cisco’s Intercloud Strategy

Cisco announced its Intercloud strategy in March 2014 and has since made rapid strides in the domain. It currently has around 350 data centers spread across 50 countries. The company has already partnered with over 60 firms such as Microsoft, Telestra (Australia), Canopy (UK), Johnson Controls, Wipro (India), Red Hat and Telefonica (Spain) to expand its infrastructure-as-a-service offerings and accelerate the IoE concept. Cisco’s Intercloud utilizes the company’s Application Centric Infrastructure (ACI) to improve application performance and security. ((Cisco is Moving Fast with our Partners to deliver on the Promise of an Intercloud, Cisco, May 20 2014)) ^{[4] [5]}

The company stated last year that it intended to spend over $1 billion in the next two years to build and expand its cloud business. Its strategy of partnering with specialist organizations to expand its cloud capabilities is likely to bolster its goal of building the largest Intercloud in the world. The company estimates the Internet of Everything market to be worth $19 trillion in the next ten years, which is a key driving factor for the company’s plans to rapidly expand its cloud offerings and provide scalable and secure products to cater to the growing world of connected devices and collaborative services. ^[6]

The cloud services currently provided by Cisco include Software-as-a-Service (SaaS) offerings such as WebEx, Meraki and Cisco Cloud Web Security for improved collaboration. It also offers cloud building services through its Unified Computing Systems (UCS), NetApp and VCE Vblock systems.

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1. Press Release, Cisco, June 3 2015 [↩]
2. Piston Closes $8 Million in Series B Funding to Accelerate OpenStack® Adoption, Piston Cloud Computing Archives, Feb 4 2013 [↩]
3. Fact Sheet, Piston Cloud Computing [↩]
4. Cisco, Red Hat broaden partnership, eye integrated OpenStack systems, ZDNet, Sept 4 2014 [↩]
5. Cisco and Microsoft Extend Relationship with New Cloud Platform, Cisco, March 11 2015 [↩]
6. Press Release, Cisco, March 24 2014 [↩]