Last Friday Cisco announced that it would be acquiring network intelligence provider, ThousandEyes. The deal is for a reported $1 billion. ThousandEyes had previously raised over $110 million from investors including GV, Tenaya Capital, Sutter Hill Ventures, Salesforce Ventures, and Sequoia Capital. According to PitchBook data the most recent post-money valuation was was $670 million on its $50 million Series D in February 2019. ThousandEyes’ customers include Microsoft, Slack, PayPal and Lyft.
Two trends worth noting
While the initial detail of this deal that caught the eye of the York IE team was the purchase price, there are two trends this deal highlights that we want to dive deeper on. The first is regarding ThousandEyes’ platform. ThousandEyes’ digital experience monitoring platform provides “internet-scale visibility” that enables customers to monitor the user experience of their websites and internet exposed applications. Their solution monitors internet infrastructure to show where breakdowns or blockages are occurring, so that customers can take action to remediate any latency or outages. This has only become more important as the Covid-19 pandemic, and the distribution of the workforce, has led to increased stress on internet connections.
York IE also wanted to use this space to explore Cisco’s evolution into a cloud-based software provider. Best known for their networking hardware and telecommunications equipment, the company has been making a concerted effort to add cloud-based software to their portfolio as enterprises continue their digital transformation. As CNBC stated, “Since Chuck Robbins was named Cisco’s CEO in 2015, the company has been focused on expanding its portfolio of cloud-based software so it can cater to companies that are moving away from their own data center and into more distributed environments.”
Cisco’s M&A
M&A has been a primary tool for Cisco in their product suite expansion. ThousandEyes is set to join Cisco’s new Networking Services business unit and will be integrated into its core Enterprise Networking and Cloud, and AppDynamics portfolios. AppDynamics was a $3.7 billion acquisition made in 2017 that signaled Cisco’s commitment to broadening the product portfolio to include cloud-based software. Other recent deals made by the company include the $2.35 billion purchase of Duo Security, the $1.9 billion acquisition of Broadsoft, and the $635 million addition of OpenDNS. The intention of this strategy is to protect Cisco from the stagnation of their core market. Last week, Synergy Research released its network switch and router revenue report that showed both the total market size, and Cisco’s market share, decreasing.
