Cisco is acquiring Meraki, a private company that makes WiFi mesh access points and a cloud management tool that allows network administrators to manage access points and switches, for $1.2B. Cisco is not buying Meraki for the WiFi mesh products but for the cloud software (note that the Meraki management team is joining Cisco's Cloud Networking Group, not its wireless division).
Meraki is in the same space as Ubiquiti, Ruckus Wireless and Aruba, selling WiFi equipment for large outdoor and indoor deployments; however, although it started in 2006 and received $80M in VC funding, has over 300 employees, it has not made a profit. It made $20M in revenues in Q2 2012.
By contrast, Aruba (NASDAQ:ARUN) had revenues of $126M and a non-GAAP net income of $19.4M the quarter ending 31 Jan 2012. Today it's market cap is $2.14B.
Ruckus Wireless (NYSE:RKUS) went public last Friday at $15/share, ending $12.25 close of Friday, market cap around $1B. Ruckus sells to major telcos like KDDI Japan. It has deep pocket customers among cable companies and its products are highly regarded by wireless ISPs and telecom operators. Ruckus had revenues of $49M in the quarter ending 30 Jun 2012 and net income of $3M (same quarter), if you exclude the tax benefit. It was profitable in the two quarters before that.
Ubiquiti (NASDAQ:UBNT) is a big favorite among wireless ISPs. It has just over 100 employees. Its market cap is around $1B. It had revenues of $88M in the quarter ending 31 Jan 2011 and $24.7M GAAP net income.
Meraki's founder says they were planning an IPO but decided to sell to Cisco. Most likely it's because the IPO market is weak and the public was not willing to pay as much as Cisco did.
Meraki's cloud management tool is very cool and easy to use, but remember all the other companies have cloud management software. Ruckus has FlexMaster Centralized WiFi Management; Ubiquiti has UniFi; Aruba has Network Management. Aerohive, a private company, has Hive Manage. In other words, there's nothing totally unique or ground-breaking about Meraki's cloud management tool.
In view of the valuation Cisco placed on Meraki, Ruckus, Aruba and Ubiquiti shares look really cheap.
If you want to know more about Ruckus, Aruba and Ubiquiti and the universe of large scale WiFi deployments, WiFi offloading and mobile apps, visit www.muniwireless.com.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.