Cisco's ClearAccess Deal Could Breathe New Life Into Routers Business
Cisco has announced its plans to acquire ClearAccess, a privately held network management company, in a deal that is expected to bolster Cisco’s Prime service. The financial terms of the acquisition were not disclosed; however, Cisco revealed that it is only interested in the software arm and not the hardware business, which will be spun off as SmartRG Inc.
The Smart RG Gateways portion of the business will continue forward as SmartRG, Inc. and Cisco and ClearAccess’ combined network management and software capabilities will enable service providers to better deliver, manage and monetize their services, while helping to improve operational efficiencies and customer experiences. The management software from ClearAccess will join Cisco Prime in the network management software portfolio. ClearAccess’ proven track-record for the delivery of cloud-based services will provide Cisco with new capabilities that will make it easier for customers to trial and deploy. ”The ClearAccess acquisition reinforces Cisco’s commitment to service providers by accelerating software architectural advancements in mobility, cloud and managed devices, and video,” said Jamie Lerner, vice president and general manager, Cisco Network Management Technology Group, Service Provider Applications. “ClearAccess provides a critical technology that will advance Cisco’s mission to offer service providers a complete set of tools to manage their networks, within the home and across any connected device, amid the ongoing proliferation in network traffic.”
The acquisition is expected to complete by the end of Cisco’s 2012 fiscal in July. Cisco competes with HP, Juniper Networks, Alcatel-Lucent and Huawei-3Com in the network equipment business. We currently have a$23.37 Trefis price estimate for Cisco, about 10% higher than the market price.
Cisco looks to free up network congestion
The ClearAccess acquisition will help Cisco cater to the growing needs of mobile service providers to better handle the burgeoning video and data traffic that is congesting their networks. The proliferation of mobile devices ranging from smartphones to tablets to a whole set of connected devices such as e-readers, M2M and security systems, is putting a lot of strain on wireless networks that are already constrained by insufficient spectrum.
ClearAccess’ technology will be incorporated in the existing Cisco Prime network management service portfolio to provide service providers with a set of cloud-based tools aimed at managing their overloaded networks effectively – including monitoring and managing bandwidth usage, parental controls, diagnostics and analytics – and reducing data traffic congestion.
By leveraging ClearAccess’ software, Cisco will be able to quickly create and expand its offerings in network management and advisory services. This will help increase the company’s network service revenue, going forward. In addition, helping service providers better manage their data traffic at the edge will increase the value of Cisco’s edge routers as well, driving its router business forward.
Cisco’s market share in edge routers has been declining in recent years from what was once well over 50% to about 47% currently. This move could help stem the losses in the coming years, as management of data traffic becomes even more crucial.
Network services and routers account for a combined 30% of Cisco’s total value, by our estimates.