Will The Cisco Buying Spree Continue? Analysts Predict 10 Possible Acquisitions

On The Trail

Cisco Systems did some heavy lifting on the acquisition front in 2015, unveiling its plan to spend billions to buy a total of 10 companies in a variety of markets including software and security.

Although most of the financial terms were not disclosed, the ones that were -- such as Acano for $700 million and OpenDNS for $635 million -- weren't blockbusters compared with Dell's $67 billion planned purchase of EMC. Some analysts and Cisco partners say 2016 will be the year the San Jose, Calif., networking giant makes a big acquisition such as Check Point Software Technologies or Splunk as fast-growing markets such as security continue to expand.

Here are 10 companies that analysts and partners are placing their bets on Cisco buying in 2016.

Check Point Software Technologies

CEO: Gil Shwed

Market Cap: $14.3 billion

Founded: 1993

Headquarters: Israel

"The big advantage in Check Point is that they're overseas-based. They could use foreign cash for that, which they have a lot of," said Zeus Kerravala, principal analyst at ZK Research. "Cisco typically doesn't have a lot of U.S. cash, so almost all of its U.S. cash gets used for stock buybacks or paying dividends, which means if they're going to buy in the U.S. it's likely to be a smaller acquisition. … But you look overseas, they're not adverse to buying [larger] companies."

Check Point reported revenue of $404 million for its third-quarter fiscal year 2015, up 9 percent year over year. Check Point President Amnon Bar-Lev recently told CRN he sees the company now as a threat prevention specialist. "About 30 [percent] to 40 percent of what I'm selling today is threat prevention on top of my gateways," said Bar-Lev. "We're talking about $1.5 billion a year only from annuity services that are purely threat prevention."

Docker

CEO: Ben Golub

Market Cap: Not publicly traded

Founded: 2008 (formerly dotCloud)

Headquarters: San Francisco

"Containers and microservices are hot -- i.e., the next big thing," said a financial analyst who was not authorized to publicly comment on the matter. "Cisco wants growth and to be in the center where app architectures are going, and Docker represents where the market is going."

In December, Cisco added support for Docker containers for its Application Centric Infrastructure (ACI). Docker aims to deliver open tools to help developers build applications with open APIs to help companies better manage applications. Last month, Oracle said it would acquire StackEngine, a startup that develops management and automation tools for Docker containers.

Splunk

CEO: Doug Merritt

Market Cap: $6.8 billion

Founded: 2003

Headquarters: San Francisco

Rising big data and security intelligence software company Splunk would be a great network management play for Cisco, said analysts and partners.

"Splunk is a network management play, and Cisco's been trying to build up its capabilities there. It's an important part of data analytics and data sciences," said Kerravala. "They have a lot of partners as well."

The software company reported revenue of $175 million for its third-quarter fiscal year 2015, up 50 percent year over year, while adding more than 500 new customers during the quarter. Its financial outlook for its fourth quarter is more than $200 million in total revenue.

FireEye

CEO: David DeWalt

Market Cap: $2.8 billion

Founded: 2004

Headquarters: Milpitas, Calif.

In a recent report by FBR Managing Director and Senior Analyst Daniel Ives, he predicts FireEye will be bought in 2016, citing Cisco as a top candidate.

"2016 might finally be the year of security M&A, as we believe larger tech players such as Cisco … could be shopping for cybersecurity vendors to help fill product holes," said Ives in his report. "Cisco delivered 7 percent security growth in its latest quarter and appears focused on driving success in this space, as it finally found the right formula via organic and acquisitive (e.g. Sourcefire) means."

In May, speculation arose that FireEye had been the target of a $9 billion buyout bid by Cisco, which was denied by the networking giant. In the company's most recent earnings call in November, FireEye CEO David DeWalt avoided questions about whether it was evaluating a buyout, saying that he would "do what's right for shareholders."

"We’ve been hearing about [FireEye] for a while now," said an executive solution provider and Cisco Gold partner, who asked not to be identified. "Their malware and other security things might fit well inside Cisco, maybe similar to what they did with Sourcefire."

Nutanix

CEO: Dheeraj Pandey

Market Cap: Not publicly traded

Founded: 2009

Headquarters: San Jose, Calif.

Although Cisco reportedly is creating a new hyper-converged appliance through a new partnership with hyper-converged startup Springpath, according to CRn sources, analysts and partners say an acquisition of a leader in this space would significantly benefit Cisco in 2016.

"Nutanix makes sense. [Hyper-converged] is a core part of data center today," said Kerravala. "To me it's the more obvious reason out there that they could bring in and make some headway in it."

"Nutanix is a company I'd hope they're looking at buying," said the Cisco Gold partner who asked not to be identified.

The hyper-converged infrastructure market is expected to grow from $2 billion this year to $5 billion in 2019, according to market research firm Gartner. Technology Business Research also recently released a report saying the hyper-converged market will increase at an annual growth rate of 60 percent over the next three years.

ZScaler

CEO: Jay Chaudhry

Market Cap: Not a publicly traded company

Founded: 2008

Headquarters: San Jose, Calif.

"Providing security as applications migrate to the cloud is increasingly important," said the financial analyst who asked not to be named. "ZScaler is key to providing cloud-based security today. Many of Cisco's competitors partner with ZScaler, which is an added bonus."

The cloud-based security company owns a Security as a Service platform that provides sandboxing, SSL inspection, application security, antivirus, Web security and vulnerability management. The company nabbed $100 million in a Series B funding round in August that included backing from EMC.

For its most recent quarterly earnings, ZScaler in September said the company's midmarket sales grew more than 400 percent year over year.

Infoblox

CEO: Jesper Andersen

Market Cap: Not a publicly traded company

Founded: 1999

Headquarters: Santa Clara, Calif.

"Cisco is very familiar with the core network buyers that Infoblox sells to, and IP address management becomes increasingly important as applications move to the cloud and as containers proliferate," said the financial analyst. "And the new Infoblox CEO is ex-Cisco."

Andersen spent five years in executive roles at Cisco from 2008 to 2013 including senior vice president and general manager of Cisco's service provider video segment as well as senior vice president of network management.

The network control specialist reported revenue of $94 million for its first-quarter fiscal year 2016 in November, up 41 percent year over year. Product revenue grew 61 percent, while services grew 23 percent compared with a year ago.

Radware

CEO: Roy Zisapel

Market Cap: $620 million

Founded: 1997

Headquarters: Israel

Radware was named a leader in the Application Delivery Controller space by Gartner, which ranked the company No. 2 in both execution and vision on its 2015 Magic Quadrant. Radware provides application delivery, load balancing and DDoS protection solutions.

"Cisco could gobble them up and that's an important part of the data center space," said Kerravala. "They're based overseas, so that helps."

Five9

CEO: Mike Burkland

Market Cap: $420 million

Founded: 2001

Headquarters: San Ramon, Calif.

Cloud-based contact center software specialist Five9 would be a great addition to Cisco as cloud adoption increases in 2016, according to Kerravala.

"[Cisco] has got a good premises-based contact center solution, but most of the growth in contact center has been in the cloud space so Five9 would makes sense for Cisco right now," he said.

In April, former longtime Cisco veteran Mike Crane jumped ship to Five9 as its new executive vice president of services. Crane, Cisco's former vice president of advanced services, said he left because more enterprise customers were looking at cloud-based solutions versus on-premise.

Viptela

CEO: Amir Khan

Market Cap: Not a publicly traded company

Founded: 2012

Headquarters: San Jose, Calif.

The software-defined wide area network (SD-WAN) startup would be a "great steal" for Cisco in 2016, according to the financial analyst. "SD-WAN is very hot right now, and Viptela is the most visible of the new SD-WAN players," he said.

According to a recent report by Gartner, WAN carriers will increasingly incorporate SD-WAN capabilities into their enterprise-class service offerings. By 2018, 10 percent of enterprises will have replaced their WAN routing with SD-WAN, up from less than 1 percent in 2015.

The startup emerged from stealth in May 2014, touting its Secure Extensible Network as the first software-based solution that integrates routing, network security and segmentation policy into a single solution. Viptela CEO Amir Khan was director of product management for Cisco from 2002 to 2007, before jumping to Juniper Networks.