Cisco to Acquire Tail-f for $175M to Expand Cloud Service

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Network equipment maker Cisco Systems, Inc. (CSCO) recently acquired Tail-f Systems, a Swedish virtualization startup for $175 million to bolster its cloud-services portfolio. The purchase price includes cash and retention-based incentives.  The deal is likely to close in the fourth quarter of fiscal 2014. Per the deal, Tail-f's 75 employees will join Cisco’s cloud and virtualization group.

Tail-f, a Stockholm-based privately held company, is a networking software maker and offers network service orchestration products for both traditional and virtualized networks. Tail-f's network service orchestration solutions, including its Network Control System ("NCS"), focuses on the telecom networking component operations support system ("OSS"), allowing service operators to provision their applications, network services and networking devices with a single software tool.

Today, OSSs have to handle constantly rising traffic volumes and extensive infrastructure, which have made the management of network operators costly and difficult. Tail-f’s technology helps in simplifying operations and replacing the conventional, time-consuming, high-touch provisioning model with a real-time, automated approach. In short, it virtualizes telecom infrastructure in the cloud by virtualizing and reorganizing the OSS. Tail-f had raised $6.3 million from investments by SEB Venture Capital.

As more and more  people, devices, and sensors are connecting across the Internet of Things (IoT), Tail-f will help Cisco bolster its cloud and virtualization offerings and improve its network management and automation technology. The orchestration technology will simplify and automate the provisioning of both traditional and virtual networks.

In addition it will carve a path for Cisco to gain access to AT&T (T) Domain 2.0 initiative, an attempt to virtualize the AT&T service network with software-defined networking ("SDN") and network functions virtualization ("NFV"). Tail-f is one of the six suppliers for Domain 2.0, with the list also including Ericsson, Metaswitch Networks, startup Affirmed Networks, Juniper Networks (JNPR) and Amdocs (DOX).

Cisco currently holds a Zacks Rank #2 (Buy).

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