It’s going to be a short week with US Thanksgiving, but Cisco has begun on a high note with the announcement that it is buying Meraki for US$ 1.2 billion, only a matter of days after it announced it was buying Cloupia for the relatively paltry sum of US$ 125 million.

Both Cloupia and Meraki look to make up ground in the cloud space for Cisco, with the Meraki buy set to establish the base of Cisco’s Cloud Networking Group.

Why Meraki Went With Cisco

Meraki is based in San Francisco and also has offices in New York, London and Mexico. The company was founded in 2006 by members of MIT's Laboratory for Computer Science.

It is a privately held company that has developed over the past seven years with the backing of Sequoia Capital and Google, and while it had considered launching on the stock exchange, it says that the buy-out by Cisco will push it towards it goal of revenues of US$ 1 billion per year without having to go the IPO route.

Explaining the deal in a letter to employees, which it made public on its website, Sanjit Biswas CEO of Meraki has outlined some of the major points around Meraki this year.

"This year has been particularly amazing for us (sorry to say amazing three times in a row, but it really has been). We successfully shipped another major product family, achieved a $100M bookings run rate, grew from 120 to 330 employees and did it all while achieving positive cash flow."

He also said that for the original founders it made sense on three different levels:

  1. Cisco wants to continue its release pattern and to "cloudify" other Cisco products.
  2. Business model fits across all teams and departments.
  3. Corporate culture facilitates recruitment of suitable candidates in the San Francisco headquarters.

And of course there’s also the US$ 1.25 billion, which must have weighed heavily on the minds of the original founders.

Cisco’s Meraki Plans

But it’s not all about Meraki. For Cisco, it is another step into the cloud market as Meraki provides technology for developing WiFi, security and mobile device management and switching.

More importantly for Cisco, it also has a deep reach into the small and medium-sized market that to date has eluded Cisco providing it with opportunities to bring its other products into that market too.

In a statement issued around the announcement, Rob Soderbery, senior vice president, Cisco Enterprise Networking Group, said:

The acquisition of Meraki enables Cisco to make simple, secure, cloud managed networks available to our global customer base of mid-sized businesses and enterprises. These companies have the same IT needs as larger organizations, but without the resources to integrate complex IT solutions…Meraki’s solution was built from the ground up optimized for cloud, with tremendous scale, and is already in use by thousands of customers to manage hundreds of thousands of devices.”

Cisco, based in San Jose, California, expects the acquisition to close in its second fiscal quarter ending in January. If you are interested in more on Meraki, check out the video below.