With the $1.4 billion acquisition of Jasper Technologies, Cisco Systems covers multiple bases. The networking giant acquires a business that makes it more of a software vendor, gains an Internet of things stack and develops a recurring revenue cloud business model.
Cisco executives were quick to note that Jasper was a transformational acquisition and it's hard to disagree. Jasper is the leading Internet of things platform that can connect multiple devices such as a car, engine or wearable. Jasper is also a software-as-a-service offering that can go across multiple platforms at scale.
For instance, Jasper is used within Kindles to connect and manage content delivery over multiple networks. Without Jasper, Amazon would have to work with every service provider in multiple markets to hook up Kindle e-readers.
From an Internet of things perspective, Jasper fits will with Cisco's portfolio. Cisco was strong in the low end of the IoT stack with wireless protocols, mesh networking, gateways and analytics to manage those devices.
Rowan Trollope, Cisco's general manager for IoT and collaboration, said:
Our IoT portfolio, we have had tremendous success in quite a few industry verticals, starting with industrial manufacturing as one example. We're hoping to connect over physical infrastructure as well as wireless infrastructure, many of these customers' devices. Whether it's elevators or with connected robot arms, factories for automation and so on and so forth.
The world of movable things is another interesting area, clearly, that is where Jasper is today, has made incredible progress with ESP. So tying those two together, we have technologies that Cisco at a lower level in the stack that have to do with pure connectivity.
Trollope concluded that Cisco and Jasper made "a nice sandwich." "We've got the bread and Jasper's got some of the meat, come together and you get some incredible, an incredible meal, frankly, as a customer. That's maybe not the best analogy. I think I was going for the chocolate and peanut butter, is exactly what I was going for. Complementary portfolios across both companies," he said.
Stifel analyst Sanjiv R. Wadhwani said:
We believe the acquisition of Jasper is a key move in helping Cisco potentially become the leading IoT platform. While IoT is very early in its industry evolution, with industry heavy-weights like Intel and Qualcomm vying to establish their own IoT platform as the standard, we believe Cisco now has a compelling case to take the lead as it can deliver an end-to-end IoT solution (from the full wireless network edge to the traditional industrial/smart cities/enterprises to the management console via its IoT data analytics solution).
Perhaps the biggest win for Cisco over time is that Jasper adds to software revenue. Jasper has a large customer base, but Cisco can offer it more reach. Jasper will be able to scale much easier with Cisco's footprint.
Paul Silverstein, an analyst at Cowen, noted Cisco has made 17 acquisitions over the last 12 months in cloud, video, analytics and security. All of those companies have better margins than Cisco.
Jasper will add to recurring revenue as Cisco navigates a software defined world. Hardware still matters for Cisco, but ultimately the networking giant will need subscription revenue. Enter Jasper, which may turbo charge Cisco's software efforts.