In a deal that is expected to boost Cisco’s collaboration tools and help the company diversify its offerings away from switching and routing, on Monday, Cisco Systems Inc said that it will buy software company BroadSoft Inc for $1.71 billion.
Shareholders of BroadSoft were given a premium of 2 percent to last Friday’s closing share price, as there was a 1.35 percent rise in the shares of the company after Cisco offered $55 per share for the company, BroadSoft specializes in software used by major cable and telecommunications networks.
The media had reported in late August that BroadSoft was exploring a potential sale the company was exploring a potential sale and the last offer price that Cisco gave to the company is more than 25 percent higher than where BroadSoft shares were trading at the time of such media reports.
For those big telecom firm clients of Cisco which can then provide integrated mobile, video, voice and other forms of electronic communications to their small and medium-size business customers, this deal will give the company a stronger foothold in selling products related to those services.
BroadSoft’s products, which are delivered over the cloud, or the Internet, will improve Cisco’s collaboration portfolio, said Rob Salvagno, Cisco’s vice president of corporate development, said in an interview. Based on premise, which means they are installed on devices, are Cisco’s current products in that unit such as WebEx.
Cisco shares also rose about 1 percent.
“This is a smart acquisition that gives Cisco more firepower to sell into its massive installed base over the coming years,” said Daniel Ives, chief strategy officer at research firm GBH Insights.
Both the companies said in a statement that the first quarter of 2018v is the expected time when the deal, valued at $1.9 billion including debt, is expected to close.
Cisco’s unified communications technology group will be the unit where BroadSoft employees will join after the deal.
High-growth areas such as security, the Internet of Things and cloud computing has been the current focus of Cisco, like other large technology companies.
Offer of the so-called unified communications over their internet protocol networks is the service that BroadSoft provides software and services for to mobile, fixed-line and cable service providers.
Large telecommunications companies such as Verizon Communications Inc and AT&T Inc are the one to which BroadSoft has historically sold its products to. These large companies then resell the software to their business customers. Salvagno added that a lot of customers are shared by Cisco and BroadSoft.
Following a $3.7 billion deal for privately held AppDynamics Inc in March, the BroadSoft deal is Cisco’s second major acquisition this year.
“With BroadSoft, Cisco will be able to cover a wider swath of the market,” Drexel Hamilton analyst Brian White wrote in a note.
While Bank of America advised Cisco, Jefferies and Qatalyst Partners advised BroadSoft on the deal.
(Adapted from Reuters)