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Cisco Systems, Inc. (CSCO), Sourcefire, Inc. (FIRE): Multiple New Acquisitions May Enhance This Company’s Position

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Cisco Systems, Inc. (NASDAQ:CSCO)

Cisco Systems, Inc. (NASDAQ:CSCO) is a market leader in the networking segment. The company specializes in IP based switching products and has global presence. With over 60% market share, the company has massive clout. Cisco Systems, Inc. (NASDAQ:CSCO) is now trying to augment its position with organic growth as well as acquisitions and the company had been mulling purchase of various outfits including Sourcefire, Inc. (NASDAQ:FIRE). Apart from acquisitions, Cisco Systems, Inc. (NASDAQ:CSCO) also provides a compelling case for going long on the future prospects of the company.

Let’s have a look at the main points going in favor of this California based computer networking company.

Growth through acquisitions

The company recently acquired JouleX, an energy management startup. JouleX offers software solutions for better energy management. Its software also lets administrators  monitor and adjust power usage. JouleX has various collaborations with leading companies such as Siemens and Intel. As per the news, Cisco Systems, Inc. (NASDAQ:CSCO) paid $107 million for the acquisition of the energy management company.

With this new acquisition, Cisco Systems, Inc. (NASDAQ:CSCO) will have an edge over its networking peers such as Juniper Networks, Inc. (NYSE:JNPR), as it will now be able to provide energy management solutions for a wide range of networking and switching products. Juniper is currently struggling with the soft enterprise market. However, it reported strong results for the second quarter of the year where it managed to reverse the declining trend for revenue. Juniper Networks, Inc. (NYSE:JNPR) is trying to augment its position in the networking service provider segment, which accounts for two-thirds of its revenue. Cisco Systems, Inc. (NASDAQ:CSCO)’s new acquisitions will pose a new challenge for Juniper Networks, Inc. (NYSE:JNPR) as Cisco is now in a position to provide related services in one single package.

Cisco can now unlock the full potential of the JouleX technology by incorporating it in its wide range of switching products and beyond. Also, software energy management is a relatively new and untapped segment. In this case, Cisco will be able to exploit first mover advantage. The segment also boasts of higher gross margins, which may help Cisco in boosting its overall profitability.

Another point that goes in Cisco’s favor is that it is able to combine energy management hardware with energy management software, and benefit from the resulting synergies. It gives the company an advantage over pure players dealing in only hardware or software.

Technological aspects of the JouleX acquisition

The JouleX acquisition compliments Cisco’s EnergyWise offering, which marks its entry into the DCIEM sector, a growing initiative that manages data center energy wastage.

According to a study, American data centers and other companies waste over $2.8 billion in power consumption and produce an immense amount of unnecessary carbon footprints simply because they fail to shut down their PCs when they leave from work. Cisco EnergyWise is a power management architecture that monitors devices connected through a Cisco network and optimizes power consumption. JouleX solutions will enhance the capabilities of Cisco EnergyWise through a cloud-based power management platform that does not require any device side hardware or software installation.

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