Meraki buy more than cloud Wi-Fi to Cisco

Even though Meraki made a name for itself in cloud-based WLANs, Cisco's long-term goals for its new acquisition go beyond just Wi-Fi.

Cisco acquired Meraki on Sunday for $1.2 billion. Meraki is a privately held company that specializes in cloud-based management of wireless LAN, security appliances, and mobile devices for midmarket companies.

HOT MARKET: Top Tech M&A deals in 2012

But analysts see Meraki's infrastructure playing a much broader role at Cisco over time. Indeed, Meraki becomes Cisco's new Cloud Networking Group.

"Meraki is to become the new 'Cloud Networking Group,' which would imply more than just Wi-Fi," says Mike Spanbauer of Current Analysis.

Mark Fabbi of Gartner agrees.

"It's pretty clear Cisco bought Meraki because of their ability to manage cloud infrastructure and Meraki has proven that the model works and is robust," Fabbi says. "I would expect that it will become the platform for Cisco to offer different delivery and management models to a much broader product and customer set."

Cisco Senior Vice President Rob Soderbery said Meraki will appeal to midsize companies that have the same IT needs as larger organizations, but without the resources to integrate complex IT systems. Meraki's infrastructure is already used by thousands of customers to manage hundreds of thousands of devices, he said.

Zeus Kerravala sees Meraki playing a key role in Cisco's Cisco ONE programmable networking strategy and its onePK API set.

"It's more cloud management than Wi-Fi," says Zeus Kerravala of ZK Research. "It's software control pushed into the cloud. It's a front-end to onePK on the back-end. Cloud networking is actually the long term value."

Jon Oltsik of Enterprise Strategy Group sees Meraki as a delivery model for some Cisco technologies that currently require on premise hardware.

"I see Meraki as the managed networking part of the cloud strategy," he says. "Think of Cisco technologies like TrustSec, ISE, QoS, WLAN, etc. Cisco makes these things work with its own hardware and software to offer solutions with central policies, reporting, etc. The problem is that not everyone wants to buy or operate this stuff. I can manage network policy in the cloud or on-premise and it's likely that Cisco will integrate the two for a common solution."

Fabbi says that even though Meraki will be anchoring the new Cloud Networking Group, it won't be Cisco's only cloud offering. They already have cloud-based WebEx conferencing, unified communications and IronPort security services.

But Meraki could very well become Cisco's biggest cloud offering, he says.

"They wouldn't have spent over $1 billion for some WLAN bits and pieces," Fabbi says.

Jim Duffy has been covering technology for over 25 years, 21 at Network World. He also writes The Cisco Connection blog and can be reached on Twitter @Jim_Duffy.

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Cisco Q1 profit and revenue grew despite weakness in Europe

Cisco Systems posted higher revenue and profit in its fiscal first quarter despite weak orders in Europe, as results in the U.S. were strong, the networking company reported on Tuesday.

Revenue hit US$11.9 billion in the quarter, up 6 percent from a year earlier, the company said. Net income rose by almost 18 percent to $2.1 billion, with earnings per share of $0.39. Chairman and CEO John Chambers attributed the company's profit in part to strong cost containment. Cisco's fiscal first quarter ended Oct. 27.

The trends toward mobile and cloud computing are helping Cisco, Chambers said on a conference call with financial analysts.

"The network has never played a more central role," Chambers said.

Not counting certain one-time items, earnings per share was $0.48. That beat analysts' consensus estimate of $0.46 per share according to a poll by Thomson Reuters. Analysts had expected $11.8 billion in revenue, an estimate Cisco also slightly exceeded.

For the current quarter, Cisco expects revenue to grow between 3.5 percent and 5.5 percent.

(More to come.)

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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Cisco to build small cellular base stations, Chambers says

Cisco Systems plans to build small cellular base stations, building upon its fast-growing business in Wi-Fi base stations for mobile operator networks, Chairman and CEO John Chambers said on Tuesday.

The move will bring the networking giant into a major part of communications infrastructure that until now it has left mostly to the handful of major manufacturers that are steeped in the cellular world, such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent. But Cisco won't build the full-size "macro" base stations that have formed the basis of that business until now, instead focusing on so-called "small cells" that cover smaller areas.

Mobile operators can deploy small cells in densely populated areas to increase their networks' capacity to carry calls and data services. With proper coordination between the small and macro cells, carriers can serve more subscribers using the same amount of radio spectrum, which is at a premium in many areas.

Cisco executives have said in the past that the company was studying how it might participate in the cellular radio market. On a conference call Tuesday about Cisco's first-quarter financial results, Chambers gave a definitive answer.

Responding to an analyst's question about radio-access networks, Chambers said Cisco has had great success so far with Wi-Fi access points it makes for mobile operators. Revenue in that business is only about US$100 million per year, a relatively small number for Cisco, but that figure roughly doubled in the quarter from a year earlier on the strength of several new deals with carriers, Chambers said.

"Then, we're going to move into small cell, and then we're going to combine small cell with [service-provider] Wi-Fi, with 3G, with 4G, with our architectural plays," Chambers said. While specifying that Cisco won't make "traditional" base stations, the large radios that are typically found on towers, he said Cisco would make the kinds of base stations designed to go on top of light poles. That's the type of deployment envisioned for public, outdoor small cells.

Cisco has been selling itself in the mobile carrier arena as a provider of unified end-to-end infrastructure that ties the wireless edge of the network to fast wired connections and network management capabilities on the back end. But until now its wireless pitch has been limited mostly to Wi-Fi access points, a technology that Cisco dominates in homes and offices and which is starting to play a crucial role in mobile carrier networks. Where service providers can use Wi-Fi, they tap into unlicensed spectrum that can carry customers' data traffic at speeds comparable to 4G, easing the burden on their expensive licensed frequencies.

Cisco is not entirely new to cellular base stations, having worked with partner ip.access on the AT&T MicroCell, a tiny "femtocell" designed for use in a consumer's home. But entering into the public small-cell business will expose Cisco to both a much bigger opportunity and a long list of technical and sitingchallenges that are still being worked out. Key among these is the ability of long-range macrocells to coordinate with small cells so that the two can deliver the maximum efficiency and not interfere with each other.4

Combining small cells with Wi-Fi in the same access point may be a natural move for Cisco and is one that other vendors are already working on. A hybrid cellular and Wi-Fi access point holds the promise of both simplicity for location and mounting and flexibility for serving subscribers with the best possible technology in a given situation.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com

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