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Cisco: Now Equipped With A Thousand Eyes

Jun. 08, 2020 6:16 PM ETCisco Systems, Inc. (CSCO)FTNT, SWI, VMW, ZM17 Comments
Chetan Woodun profile picture
Chetan Woodun


  • Cisco has confirmed its intent for the ThousandEyes acquisition.
  • The company should benefit immensely as the acquisition is fully aligned to strategic objectives.
  • Moreover, there are revenue, cost, and financial synergies.
  • Equally important, Cisco should also have a better view of the competition through ThousandEyes.
  • There should be a considerable upside in the stock price.

Cisco (NASDAQ:CSCO) has confirmed its intention to acquire ThousandEyes (a private company) which specializes in network monitoring and performance solutions. Taking into consideration Cisco's long list of acquisitions, investors have questions as to whether this is just one more acquisition or that it will make a real difference for the networking giant growth prospects.

According to a video published on Cisco's website, the management through Todd Nightingale, Senior Vice President and General Manager of Cisco's Enterprise Networking and Cloud business, was upbeat about the acquisition and among all the talks, this is the one phrase which caught my attention:

It will enhance our network performance and monitoring capabilities right across the enterprise and into the cloud"

Figure 1: Cisco acquisition of ThousandEyes.

Source: Built using images from Cisco.com and Thousandeyes.com

This appears to be a strong acquisition for Cisco at a time when due to COVID-19 employees are increasingly working from home and managers are thinking twice before sending technical staff to remote offices because of infection risks.

The ability of the ThousandEyes solution to provide visibility across the network and measure performance are undoubtedly key enablers for remote work and the ability to streamline human interventions only when necessary, thereby reducing infection risks.

However, besides all of this praise, it is important for investors to have a clear idea of the real possibilities and impact on both the top and bottom lines.

Some may remember that costly Webex (Cisco web conferencing tool) acquisition back in 2007 for $3.2 billion. However, others will also remember that some employees exited Cisco after the acquisition in 2011 to form Zoom (ZM), which is now a strong competitor for Webex.

Therefore, I first identify opportunities for Cisco by deep-diving into the solution proposed by ThousandEyes and second, bring forward the synergies this acquisition can produce

This article was written by

Chetan Woodun profile picture
My aim is to provide differentiated insights, whether it is for investing, trading, or informational reasons. For this purpose, I am not a classical equity researcher or fund manager, but, I come from the IT world as the founder of Keylogin Information and Technologies Co. Ltd. Thus, my research is often backed by analytics and I make frequent use of charts to support my position.I also invest, and thus, in this tumultuous market, I often look for strategies to preserve capital. As per my career history below, I have wide experience, initially as an implementer in virtualization and cloud, and I was subsequently a team leader and project lead, mostly working in telcos.I like to write around themes like automated supply chains, Generative AI, telcos Capex, the deflationary nature of software, semiconductors, etc and I am often contrarian. I have also covered biotechs.I have also been an entrepreneur in real estate ( a mediocre one), a business owner, and a farmer, and dedicate at least 5 hours per week to working on a non-profit basis. For this purpose, I help needy families by providing sponsored work and contributing peer reviews and opinions for enterprise tech.I have been investing for the last 25 years, initially in mutual or indexed funds before later opting for individual stocks. Got a lot of experience in the 2008/2009 downturn when I lost a lot due mostly to wrong advice. Since then I do my own research and have fallen in love with Seeking Alpha because of the unique perspectives it provides to someone investing hard-earned money as well as access to some of the best analysts.

Analyst’s Disclosure: I am/we are long CSCO; SWI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This is an investment thesis and is intended for informational purposes only. Investors are kindly requested to do additional research before investing or divesting.

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Comments (17)

NervousNeville profile picture
CSCO continues to not behave like a quality stock and lag everything else in my portfolio. It was the worst today. It's on thin ice!
European investor 99 profile picture
Oversold for no reason. I just bought a big chunk today
Cisco Systems is a great play on the suddenly weak to worthless US Dollar.

Who hasn't been buying gold for the last 10,000 years?
Been 20 years since I've looked at the name but given the weak to worthless US Dollar I would rate Cisco Systems a strong buy on today's total liquidation of all of equities "news."
Gordonr profile picture
I owned Cisco back in the 90’s when they were growing like crazy. Haven’t owned since.
Until now! The new stay at home trend is what brought me back.
Good article!
Chetan Woodun profile picture
Thanks - hope you benefit from the dip
More Coolaid! No doubt Cisco is very healthy and it's legacy products ( routers and switches) provide tremendous revenue. Also going to a lease basis has created steady revenue. Cisco first purchase was a company called Cressendo. Cressendo created the switches which account for much of Cisco's revenue. Other than that most of Cisco's purchases have had short term success and long term poor performance. I can list off a bunch. Cisco overpays, then doesn't integrate the software ( they imbed it). Software ends up not keep up, the people they bought vest their stock and leave, and create another better product. The lastest is Zoom which is killing Webex. So expect short term this is a great deal. Long term it will be another company Cisco vastly overpaid for. The good news is Cisco is making so much money that it will never come to light. I remember when Cisco paid almost 5 B for software to manage Phone Company centers, I remember when Cisco bought a company called Ironport for email security. Today the 5 B software is gone and they resell software from Agari rather than Ironport. So stop drinking the Cisco Coolaid. Great cash cow. The remind me of IBM 30 years ago, looking for where to go next.
Chetan Woodun profile picture
If Cisco executes well on that WebEx part integration & given those security issues on Zoom, Zoom is dead !
Terry- most of your statements above are incorrect. For example, the Ironport acquisition you mention is in fact the core of Cisco Email Security platform. (CES). Agari is an optional add on to CES and ESA (premise Ironport Email Appliance. ) 
Sourcefire IPS acquired in 2013 I think , is now the core software for Cisco NGFW firewalls.
OpenDNS acquired a few years ago is now Cisco Umbrella , Cisco Secure Internet Gateway that is taking share from ZScaler. Cisco bought Meraki and left Meraki brand intact and enhanced Meraki significantly Duo recently acquired as Cloud MFA is already integrated to Cisco ISE and Cisco Firewalls. Cisco is better at integrating acquisitions and creating value of the acquired technology , than almost any other Tech company in the world. Partly because Cisco has more experience integrating Acquisitons. Over 200 acquisitions over last 12-15 years. When w Elon back 3-4 years from now and 1000 eyes agents are embedded in all Cisco networking SDWAN and UCS GEAR you will see the brilliance of this acquisition as well. Please check your facts. Open to any comments or corrections. Thx all.
European investor 99 profile picture
@LBlakeH perfect answer. Was about to write the same actually....
snosaint profile picture
At least once a year i perseverate over selling cisco and while i am doing that dance usually something just like this crops up and makes me want to stay a while longer...
Ramy Taraboulsi, CFA profile picture
Thanks @Chetan Woodun for the report.

You said: "Also, there are some cost synergies as Cisco will have access to ThousandEyes' cutting edge technology which it can apply across its whole spectrum of products including Meraki (Cisco's wireless and device management solution) and Webex."

Other than standard common head office cost savings, do you see any other possibilities of integration/synergies of Webex and ThousandEyes?
Chetan Woodun profile picture
Thanks for your feedback Ramy. I saw two benefits but have too few material to publish it. Will come to you later on this one
@Ramy Taraboulsi, CFA - a few additional benefits Cisco will see w 1000 Eyes integrated into Cisco core Enterprise Networking (EN), Collab line, including Webex ad Webex Teams, Data Center and Multi Cloud portfolios;
There will be Hard dollar savings for Cisco Support (TAC) to help customers trouble shoot difficult IT problems. Cisco TAC is one of the largest, most respected Support Organizations in the world. If Cisco ONLY bought 1K Eyes for their internal TAC teams to support Cisco's largest most complex customers, the acquisition will pay for itself very quickly in TAC man hours saved spent troubleshooting issues.
Cisco will have competitive differentiation vs VMWare, Arista, Zoom, HPE, Huawei and Nutanix by having 1k Eyes agents embedded across entire EN and DC portfolio. Along with App Dynamics, Cisco will give customers visibility across, Networking, Wireless , Routers, SDWAN, Application performance Metrics and Public Cloud Performance metrics in a single integrated Console. 1000 Eyes integrated in to DNA Center and Cisco Intersight. All the other competitors will have to cobble together visibility tools from 2-4 or more different tool vendors to provide the same visibility into performance and bottlenecks in traffic, that Cisco will able to see across Cisco native management tools.
Large Cisco Customers, think; DoD, Apple, Amazon, Microsoft, Oracle, Boeing, JP Morgan, Goldman, SpaceX etc are trying to reduce the number of IT vendors to 3-4 Strategic vendors, and try to eliminate the dozens of smaller niche IT vendors in their environments. This trend will make the Big bigger like Cisco/Microsoft/ VmWare / Amazon/ Service Now/SFDC , and make it harder for small specialized niche players pick up contracts from the largest F500 companies and Governments. the 1k eyes acquisition will help Cisco fill a visibility gap in their portfolio, and keep customers that much more entrenched in Cisco Solutions. I welcome any feedback or disagreements
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