Will Cloud Acquisitions Boost Cisco And IBM?

Includes: CSCO, IBM
by: Lionfin Capital


Recent cloud acquisitions by Cisco and IBM offer both companies the chance to recover from 2013's underperformance.

Cisco's cloud acquisitions drive connection across multiple platforms.

IBM's cloud acquisitions help build the company's SoftLayer and MobileFirst platforms.

Cisco and IBM In The Cloud- Proven leaders?

The cloud market is estimated to be a $222.5B market by 2015, with 23.5% annual growth. This growth translates to a 225% increase in the cloud space from 2010-2015. Cisco (NASDAQ:CSCO), a technology giant that has struggled in recent years, should regain its footing due to the expansion of its cloud platform. In the company's latest conference call, CEO John Chambers noted that cloud services experienced, "very strong growth," while highlighting double-digit booking growth for cloud infrastructure. Recently, the company announced $1B to become a cloud provider. I believe this move pits Cisco against strong and established competition, however, it is better late than never. IBM (NYSE:IBM), a second major technology player, is already a cloud provider with SoftLayer. In IBM's most recent conference call, CFO Martin Schroeter cited, "strong performance," in cloud, and emphasized the company's continued investments in cloud. Like Cisco, IBM lagged the market last year, but the cloud acquisitions made by both companies need to be closely watched. Well-timed and strategic cloud companies offer both companies the opportunity to outperform.

Cisco's Cloud Acquisitions- Connection across multiple platforms

1. Collaborate.com (December 17, 2013)

The acquisition of Collaborate.com, a mobile and web application that connects workers, allows Cisco to profit from the move toward mobile and cloud-based solutions. Collaborate's platform's allows for the integration of iCloud, Google (NASDAQ:GOOG) Drive, Box, Dropbox, and Evernote, while connecting mobile document sharing and task management. Apple's (NASDAQ:AAPL) iOS and Google's Android platform support the Collaborate app. Collaborate.com is no longer a functioning domain, and the app has been removed from the App Store and Google Play. However, Cisco intends to combine Collaborate with its current video conferencing, communications, and WebEx platforms. I believe that Cisco will integrate Collaborate into Cisco Jabber. Cisco Jabber allows for communication and collaboration across all devices and platforms. Gartner (NYSE:IT), an American IT and technology advisory firm, places Cisco in the Magic Quadrant for unified communications solutions, such as Jabber.

2. Sourcefire (July 23, 2013)

Sourcefire is a cloud cybersecurity leader that uses a threat-centric model. Sourcefire provides customers access to the "full attack continuum," and the ability to respond to attacks at any time. The demand for widened cybersecurity is growing as attackers begin to attack the extended network outside of traditional walls. The acquisition of Sourcefire builds Cisco's threat protection solutions and broadens the scope of protection. Currently, Cisco is not making any changes to Sourcefire's services, but will continue to invest and develop Sourcefire's major offerings, Snort and FirePOWER. FirePOWER is Sourcefire's main Intrusion Prevention System [IPS] offering. Recently, Gartner noted that Cisco's acquisition of Sourcefire makes it an industry leader in the IPS space. Cisco currently accounts for one-third of global IPS sales. A major reason behind Gartner's bullish rhetoric was Sourcefire's FirePOWER. Gartner favors FirePOWER, because FirePOWER is a Next-Generation IPS [NGIPS]. The NGIPS denotation signifies that a company has sufficiently adapted to changing threats and can respond to advanced targeted threats that evade first-generation IPSs. Snort is an open-source security platform with 4 million downloads. Snort is the world's most widely-deployed detection and prevention technology. Cisco stated that it will be integrating Snort into ASA. ASA, which stands for Adaptive Security Appliances, is Cisco's industry-leading firewall. Better yet, Cisco recently announced a trade-in program for its current IPS 4x00 appliance and competitive IPS products. Qualified trade-ins will receive a free addition of the FirePOWER administrator class. The trade-in incentivizes the move to the cloud, and will likely create returning customers once customers switch to the Sourcefire portfolio.

3. Composite Software (June 20, 2013)

Cisco plans to integrate Composite Software, a cloud data virtualization software and services company, into its existing data solutions. Composite Software helps Cisco accelerate its transition from physical networks to cloud data solutions. As the move toward cloud data progresses, Composite Software solves the need to integrate old data with new cloud data. The process by which Composite Software combines multiple data sources, known as data virtualization, provides consumers the ability to access all types of data in one place. Cisco plans to integrate Composite Software's solutions into its Unified Platform. Cisco's Unified Platform combines compute, storage, network and management into an IT automation platform across physical and virtual settings. Cisco's Unified Platform is an excellent innovation, because it offers customers real-time access to their data, which leads to increased efficiency, agility, and simplicity. Also, Composite Software will add to Cisco ONE. Cisco ONE allows applications to interact with the network, thereby increasing network performance and gaining network knowledge. Composite Software's query optimization specialization benefits Cisco's network knowledge and Unified Computing Solutions.

IBM's Cloud Acquisitions- Investments in SoftLayer and MobileFirst

1. Cloudant (February 24, 2014)

Cloudant is a database-as-a-service (DBaaS) provider that allows developers to create next-generation mobile and web apps. Cloudant benefits web and mobile application developers by offering the world's first DBaaS for loading, storing, analyzing, and distributing operational application data. Cloudant is offered as a managed cloud service, and accelerates the application development process by freeing developers from data management. Better yet, Cloudant offers constant monitoring and management from Big Data experts. The current global increase in the usage of mobile devices creates ample demand for mobile applications. Cloudant's tools increase development time, as Cloudant takes care of data management with its JSON cloud-based data service. JSON is the dominant NoSQL database technology for mobile and web developers. Cloudant's JSON database service automatically stores, indexes, and distributes documents across a cluster that spans multiple racks, data centers, and cloud providers. IBM plans to integrate Cloudant into its Information and Analytics Group. The addition of Cloudant to IBM will extend IBM's Big Data and Analytics portfolio by simplifying and accelerating mobile and web app development. One specific area where Cloudant will benefit IBM is Worklight. Worklight, part of IBM's MobileFirst division, creates a platform for mobile app development. Cloudant runs on IBM's SoftLayer, and through the purchase of Cloudant, IBM extended its investment in the SoftLayer cloud infrastructure. SoftLayer provides a cloud platform that allows clients to quickly deploy mobile capabilities with the privacy and reliability of a private cloud, or the efficiency of a public cloud.

2. Fiberlink Communications (November 13, 2013)

Fiberlink Communications is a mobile management and security company. The company's primary offerings, MaaS360 cloud-based solutions, allow IBM to expand its mobile management and security capabilities. Fiberlink's MaaS360 solutions provide customers secure access to their corporate resources and information from mobile devices. Fiberlink's visibility allows customers to know who and what devices are connecting to their data. MaaS360 manages and secures devices across all platforms through its secure cloud infrastructure. The primary benefits to the MaaS360 cloud-based platform are lowered costs, as deploying hardware and software are eliminated from the process. IBM plans to integrate Fiberlink's solutions into IBM MobileFirst. IBM's vision of enterprise mobility management, part of MobileFirst, includes the need for secure transactions between all parties. Fiberlink's security solutions allow organizations to create flexible, customized mobile experiences that enhance enterprise security. A second element to MobileFirst, the aggregation of mobile resources to one platform, is met by Fiberlink. Also, IBM plans to offer MaaS360 on the SoftLayer infrastructure. Recently, Gartner recognized Fiberlink as a Magic Quadrant leader for Mobile Device Management Software. Fiberlink received such recognition as a result of the company's complete vision and execution. Better yet, 2013 marks the second consecutive year that Fiberlink received the award. A third aspect of MobileFirst that Fiberlink meets is Bring Your Own Device [BYOD] support. BYOD allows employees to use their own devices for work anytime and anywhere. MaaS360 enables IT to manage personal devices with strict data security. Better yet, MaaS360 cloud-based platform decreases time and the costs required for IT to support corporate BYOD programs. Through the cloud, users can enroll devices in less than five minutes by themselves.

3. Xtify (October 3, 2013)

Xtify is a provider of cloud-based mobile messaging tools. The company's solutions offer digital marketers the ability to use push notifications. Push notifications, notifications initiated by the publisher, encourage app usage, as users can open the application from the notification. Xtify provides IBM better access to the cloud and mobile transactions spaces. Gartner estimates that global mobile transactions will grow at 35% annually to constitute a $721B market by 2017. Also, Xtify's platform incorporates location triggers. Location triggers offer publishers the ability to automatically send push notifications once a user passes by a certain location. For example, if a user is about to walk by a publisher's store, an automatic push notification can be sent by the publisher to the app user. Better yet, Xtify offers a platform where publishers can view real-time analytics on users across mobile and web platforms. IBM's purchase of Xtify boosts both companies, as Xtify's solutions are combined with IBM's existing analytics and cloud infrastructure. Along with IBM's plan to run Xtify on its SoftLayer platform, the acquisition of Xtify will benefit MobileFirst. Also, Xtify will add to IBM's Smarter Commerce initiative. IBM's Smarter Commerce initiative helps companies engage and retain mobile app users and web visitors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: Lionfin Capital is a group of investors.