Cisco acquires Accedian for $370 million
EXFO, Accedian began as a measurement tool for the quality of service in enterprise networks and has since evolved into a more sophisticated analytics and service assurance company. Backed by private equity, the Canadian company developed a particularly close relationship with the king of switches and routers, Cisco. Now Cisco has acquired the company for $370 million.
This is the latest complementary acquisition of a service assurance company by a much larger provider, following Amdocs' acquisition of TEOCO's service assurance division (previously identified by Amdocs' attempt to acquire Mycom OSI), Oracle's acquisition of Fedoros, and Ericsson's acquisition of CENX in 2018. but the deal Cisco is probably most interested in is another large router and switch manufacturer Juniper Networks (Juniper) to acquire Netrounds in 2020.
James Crawshaw, head of business at analyst firm Omdia, said Netrounds had previously been a key partner for Cisco. Following the acquisition, Juniper went on to develop a service called Paragon, which includes service assurance, orchestration and what Crawshaw calls a "total management capability" for the network. All of which posed problems for Juniper's number one competitor.
Cisco has something similar, they call it cross-working, and it's very comprehensive, but the weaknesses are service assurance, analytics, measuring performance and finding sources of failure," says Crawshaw. By acquiring Accedian, they can integrate more fully into Crosswork and the rest of their portfolio."
Based on his estimates of Accedian's annual sales and the 3.7x P/E ratio Amdocs paid for TEOCO, he speculated that Cisco would pay about $370 million for Accedian. According to Crawshaw's research, Accedian currently has about 390 employees and could generate annual sales of about $270,000 per employee, bringing the company's overall revenue to about $100 million. A multiple of 3.7 would therefore translate into a cost of $370 million.
Integrating Accedian into Cisco machines should be relatively straightforward. crawshaw notes that, on the one hand, Cisco is a veteran of this complementary deal and, as a partner, Cisco has worked extensively with Accedian. They will have a booth at Cisco's event and Cisco will resell some of their products.
In a company blog post about the deal, Kevin Wollenweber, general manager of Cisco's networking business, said the two companies had previously worked together on an automation and assurance product for service provider customers. He said:- "The combination of Accedian's microsecond sensors and the powerful Skylight Analytics platform for service assurance, combined with Cisco's strong product portfolio, will enable Cisco to bring transformational solutions to our service provider customers."
Recent transactions in this area still leave Mycom OSI as a standalone company. Andos had been pursuing TEOCO's service assurance division before it was finally acquired by Andos. Amdocs abandoned its initial target because it felt that the competition regulator was taking too long to approve it. Gurnitilek told analysts on a conference call:We're looking at a range of other projects and we just want to get it done as quickly as possible rather than screw things up because the market won't wait."
Cisco expects to close its own deal in the first quarter of fiscal 2024, meaning Accedian will be subsumed into the data centre and provider connectivity group managed by Wollenweber after sometime between August and October. Provided there are no regulatory impediments.
This is the latest complementary acquisition of a service assurance company by a much larger provider, following Amdocs' acquisition of TEOCO's service assurance division (previously identified by Amdocs' attempt to acquire Mycom OSI), Oracle's acquisition of Fedoros, and Ericsson's acquisition of CENX in 2018. but the deal Cisco is probably most interested in is another large router and switch manufacturer Juniper Networks (Juniper) to acquire Netrounds in 2020.
James Crawshaw, head of business at analyst firm Omdia, said Netrounds had previously been a key partner for Cisco. Following the acquisition, Juniper went on to develop a service called Paragon, which includes service assurance, orchestration and what Crawshaw calls a "total management capability" for the network. All of which posed problems for Juniper's number one competitor.
Cisco has something similar, they call it cross-working, and it's very comprehensive, but the weaknesses are service assurance, analytics, measuring performance and finding sources of failure," says Crawshaw. By acquiring Accedian, they can integrate more fully into Crosswork and the rest of their portfolio."
Based on his estimates of Accedian's annual sales and the 3.7x P/E ratio Amdocs paid for TEOCO, he speculated that Cisco would pay about $370 million for Accedian. According to Crawshaw's research, Accedian currently has about 390 employees and could generate annual sales of about $270,000 per employee, bringing the company's overall revenue to about $100 million. A multiple of 3.7 would therefore translate into a cost of $370 million.
Integrating Accedian into Cisco machines should be relatively straightforward. crawshaw notes that, on the one hand, Cisco is a veteran of this complementary deal and, as a partner, Cisco has worked extensively with Accedian. They will have a booth at Cisco's event and Cisco will resell some of their products.
In a company blog post about the deal, Kevin Wollenweber, general manager of Cisco's networking business, said the two companies had previously worked together on an automation and assurance product for service provider customers. He said:- "The combination of Accedian's microsecond sensors and the powerful Skylight Analytics platform for service assurance, combined with Cisco's strong product portfolio, will enable Cisco to bring transformational solutions to our service provider customers."
Recent transactions in this area still leave Mycom OSI as a standalone company. Andos had been pursuing TEOCO's service assurance division before it was finally acquired by Andos. Amdocs abandoned its initial target because it felt that the competition regulator was taking too long to approve it. Gurnitilek told analysts on a conference call:We're looking at a range of other projects and we just want to get it done as quickly as possible rather than screw things up because the market won't wait."
Cisco expects to close its own deal in the first quarter of fiscal 2024, meaning Accedian will be subsumed into the data centre and provider connectivity group managed by Wollenweber after sometime between August and October. Provided there are no regulatory impediments.
