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John Chambers made it quite clear last week that Cisco was not done making acquisitions and that the company has not made a sizeable acquisition in a long while. He also affirmed in so many words that he realizes Cisco has been a bit slower than expected in making acquisitions and in responding to market changes.
Chambers also signaled that all of that was going to change and change fast -- although he remained elusive as to what Cisco was going to acquire that would constitute "sizeable" in his mind. Now, of course, acquisitions at a company Cisco's size would have to fall in line with a certain vision it is trying to fulfill or a certain goal it is trying to reach. Not knowing that piece of information, all we can do is speculate as to what would make sense.
After Chambers' comments last week, Citrix Systems' stock price went up on speculation of a takeover. Today I want to look at some of Cisco's potential takeover targets and analyze each. I personally believe Cisco has two acquisition possibilities -- Citrix or NetApp -- and that either would be formidable pickups, but depending on the Cisco strategy one would be more suitable than the other.
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Let's start with NetApp -- what would Cisco gain from a NetApp pickup? Although it likes to think of itself as a software company and it makes good software, NetApp's business is infrastructure. If Cisco is trying to own a piece of the storage market, NetApp is the last of the independents out there that is truly enterprise scale. This acquisition would enable Cisco to own the stack of compute, network and storage, and with its broad partnerships, NetApp has the virtualization stack well covered as well. Cisco would not need NetApp for its customers as it already has those customers, many of them as FlexPod users.
What I'm not sure about is whether IBM would allow a NetApp acquisition, given that it sells quite a bit of N-series. Would we see an HP or Dell type fight for NetApp? I wouldn't bet on it -- IBM's contracts are grandfathered in and to IBM the acquisition would not change much. It would benefit Cisco, however, to have a footprint in some IBM strongholds assuming it doesn't already exist there.
To sum up, I think a NetApp acquisition would be of limited benefit to Cisco, especially at the price it would have to pay. It would not be my first choice for sure.
Citrix, on the other hand, is truly an interesting acquisition play for Cisco, at a market cap of about $12 billion. Citrix presents a market opportunity for Cisco on many different fronts. It's no secret that Cisco never did a great job at software; with a Citrix acquisition this concern would be laid to rest forever. Although Citrix is present in many enterprises, it has nowhere near the coverage that Cisco has, which means that Cisco could potentially grow the Citrix portfolio and grow its market capabilities especially in the mobility space, which is near and dear to Cisco's heart. Citrix also is not a very partner-friendly company as evidenced by the fact that it does not even make the list of top 20 on the CRN's 2012 best companies to partner with. Cisco on the other hand is very partner friendly; that alone could move the market and create immediate value.
Citrix also recently acquired Zenprise, and Cisco definitely needs an mobile device management offering to augment Cisco ISE. With a Citrix acquisition it could kill two birds with one stone. Zenprise already integrates very nicely into Cisco ISE anyway. In addition to all of the above, Cisco would also get XenServer, a hypervisor that is popular with large cloud providers and service providers in general; that would allow it to have control over its software defined network.
The collaboration portfolio that Citrix would bring to the table is also impressive -- complimentary in some regards, overlapping in others. A Citrix acquisition would also bring a very tight relationship with Microsoft and some interesting synergies and partnering capacities. Not to mention that a Citrix acquisition will also be looked upon more easily by EMC and VMware than a NetApp acquisition, which would put EMC and Cisco in head-to-head competition immediately.
Citrix also has a hidden lethal weapon: its acquisition of Bytemobile, a company with a technology to optimize carrier networks for mobility. Once Citrix optimizes its flagship remote desktop protocol ICA/HDX for seamless optimization with Bytemobile, its offering is very alluring. To make things even more interesting, Cisco and Citrix are already collaborating on the NetScaler product and Cisco could probably integrate the Citrix Branch Repeater into its WAAS solution and offer ICA/HDX capabilities that it currently does not have. Like I said, Citrix makes for a really interesting acquisition.
If we eliminate Citrix from acquisition contention, then I would be in favor of a NetApp acquisition and an MDM acquisition. Plenty of good options are out there, including OpenPeak, AirWatch, MobileIron and others.
Whatever a "sizeable" acquisition for Cisco winds up being, it will surely transform Cisco and our industry. What do you think? I look forward to your feedback!
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