Cisco (CSCO) to Buy Fluidmesh Networks to Boost IoT Portfolio

Cisco Systems (NASDAQ:CSCO) CSCO recently announced its plans to acquire New York-based wireless tech company — Fluidmesh Networks.

Fluidmesh Networks provides high-speed wireless connectivity to ensure enhanced productivity and safety for its clients across industries like railways, mining and ports.

Notably, Fluidmesh’s wireless solutions are able to prevent loss of data even at extremely high speeds, especially in the railways sector where trains move at speeds of more than 300 Km/H.

The acquisition of Fluidmesh is expected to strengthen Cisco’s Industrial IoT portfolio and enable it to address the growing demand for IoT based solutions in the market. Nevertheless, the financial terms of the deal have been kept under wraps. The deal is expected to be completed by fourth quarter of fiscal 2020.

Notably, shares of Cisco have declined 13.6% year to date compared with the industry’s decline of 18.8% in the same time frame.

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote

Fluidmesh Buyout to Give Competitive Edge

Cisco’s strengthened portfolio from its acquisition of Fluidmesh is likely to expand its foothold in the Industrial IoT (IIoT) market, which per MarketsandMarkets data, is expected to witness a CAGR of 7.4% between 2020 and 2025.

Notably, technological advancements in semiconductor and electronic devices as well as increased use of cloud computing platforms are expected to drive growth in the IIoT industry.

Moreover, the company is likely to gain a competitive edge in IIoT where it is facing stiff competition from the likes of Siemens, Hitachi and Rockwell Automation (NYSE:ROK) among others.

Markedly, Siemens acquired Pixeom to integrate container technology for the deployment of edge IoT applications in factories, whereas Hitachi partnered with Yokogawa to share and integrate each other’s IIoT tech, know-how as well as equipment.

Recently, Rockwell Automation completed its acquisition of Italy-based ASEM to gain access to its portfolio of secure IIoT gateway solutions.

Acquisitions to Drive Long-Term Growth

Cisco’s plan to acquire Fluidmesh is in line with its strategy of enhancing its capabilities through various acquisitions.

Notably, the company acquired Lyon-based Sentryo in August, 2019 to enhance its network architecture with the latter’s superior asset visibility and cybersecurity capabilities. This will enable it to ensure the resilience of clients’ industrial networks and protect them from cyber security attacks.

Further, in July 2019, Cisco also announced its intent to buy optics technology provider — Acacia Communications — to strengthen its switching, routing and optical networking portfolio. The deal is expected to be completed by the second half of fiscal 2020.

These endeavors have given a significant boost to Cisco’s portfolio of networking solutions and are likely to aid the company in acquiring more customers. Additionally, the expanded user base is expected to drive the company’s top-line growth over the long haul.

Zacks Rank & Stocks to Consider

Currently, Cisco carries a Zacks Rank #3 (Hold).

Few other top-ranked stocks in the broader technology sector are CyberOptics Corporation CYBE, LogMein, Inc. LOGM and Netlist, Inc. NLST. All three stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for CyberOptics, LogMein and Netlist is currently pegged at 12%, 5% and 15%, respectively.

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