Cisco Takes A Leap In IoT With Jasper Acquisition

+10.64%
Upside
49.27
Market
54.51
Trefis
CSCO: Cisco logo
CSCO
Cisco

Taking a big step forward in its quest to develop an efficient ecosystem for the Internet of Things (IoT), Cisco (NASDAQ:CSCO) recently announced the acquisition of Jasper, one of the largest IoT platform providers in the world. The acquisition, valued at $1.4 billion, is expected to provide Cisco a much-needed push in the constantly evolving IoT domain. Since networking hardware is likely to get commoditized with the expansion of IoT, Jasper’s Software as a Service (SaaS) platform appears to be a valuable addition for Cisco. [1] The IoT domain is heating up, and many networking companies are investing in technologies that will ensure seamless connectivity between Internet-connected devices. Cisco has been partnering with companies to bolster its IoT portfolio and expand its reach into new markets. Its recent partnership with Ericsson (NASDAQ:ERIC) and Philips, and a six year old alliance with EMC and VMware on cloud computing are indicative of this.

Based in Santa Clara, Jasper provides a cloud-based IoT service platform to enterprises and service providers. Its integration with Cisco will provide the latter with a platform that can help Cisco develop and scale its IoT services. Per the agreement, Cisco will pay cash, assumed equity awards and additional retention based incentives.

We have a $26 price estimate for Cisco, implying a slight discount to the current market price.

Relevant Articles
  1. Down 6% In Last 3 Months, Will Cisco Stock See A Recovery Following Q2 Results?
  2. Why Is Cisco Buying Splunk?
  3. Why The Digital Infra Theme Continues To Outperform
  4. What To Expect As Cisco Publishes Q3 Earnings?
  5. Cisco Stock Looks Like A Buy At $52
  6. Here’s Why Cisco Systems Stock Has Returned Just 9% Since Late 2018

See our full analysis of Cisco

The Internet of Things Potential

The IoT domain includes computing devices other than PCs, tablets and phones. Cisco estimates that the IoT market will be worth $19 trillion over the next decade, representing a $1.7 trillion market for service providers. [2] McKinsey estimates that IoT could have an impact of up to $6.2 trillion on the global economy by 2025. [3] The installed base for IoT devices is estimated to grow from around 10 billion connected devices today to as many as 30 billion devices (or 50 as per some estimates) by 2020. [3] While these estimates may vary, they are in agreement regarding the huge potential of the market. Clearly there is a lot of growth potential for networking companies such as Cisco in addition to network infrastructure players and semiconductor companies. And with software defined networking gaining steam, hardware for IoT is likely to eventually get commoditized. Accordingly, it makes sense for Cisco to make investments on the software side.

Jasper Is A Valuable Addition

Jasper provides enterprises with services to launch, manage and scale their respective IoT services. The company has over 3,500 enterprise and 27 service provider customers across 100 countries, who have been using Jasper’s SaaS platform to manage connectivity between their Internet-connected devices. Jasper’s customers include major enterprises such as Ford, GM, Heineken and Boston Scientific, and the company sees tremendous expansion potential in the arenas of connected cars, industrial automation and security. According to Cisco, Jasper’s platform simplifies the challenges pertaining to IoT, which include but are not limited to connecting and securing millions of devices, and collecting and analyzing data. With Jasper’s SaaS platform providing automation for IoT services, Cisco would be able to offer complete IoT solutions, which are interoperable and work for the entire spectrum of customers including IoT service providers and application developers. In addition to gaining Jasper’s technology and immediate access to a number of customers, the deal offers Cisco the ability to build upon Jasper’s highly developed platform, integrating new services such as enterprise Wi-Fi, advanced analytics and better security.

With the IoT market accelerating in all directions, better services and an expanded customer base (thanks to the Ericsson partnership and Jasper acquisition) should help Cisco bring in incremental revenues in the coming years. This can easily justify the magnitude of the deal with Jasper.

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research

Notes:
  1. Cisco Announces Intent to Acquire Jasper Technologies, Inc., Cisco, Feb 3 2016 []
  2. Press release, Cisco, June 8 2015 []
  3. The Internet of Things: Sizing up the Opportunity, Mckinsey, Dec 2014 [] []