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Cisco to Purchase BroadHop

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Cisco Systems Inc. (CSCO) announced its intention to buy a Denver-based policy management solutions provider BroadHop Inc., last week. The terms of the deal were not disclosed.

BroadHop provides policy control and service management technology for carrier networks worldwide. The company’s services are used by some 90 telecom service providers serving 500 million subscribers in 40 countries.

Upon the completion of the deal, BroadHop will become a part of Cisco's Service Provider Mobility Group unit, augmenting Cisco’s offering to service providers. The integration of BroadHop policy control and network software will add value to its services by providing more flexibility to control, monetize and customize the types of service they choose on any network.

The deal will further Cisco’s strategy of increasing its software-centric solutions to streamline network management. The BroadHop acquisition will allow the company to expand and differentiate its offerings with regard to networking infrastructure. Additionally, the deal supports Cisco’s Open Network Environment (ONE) strategy, also known as Cisco ONE, which aims to help businesses increase infrastructure agility, simplify operations and instill greater application visibility and awareness.

Cisco Systems is a leading provider of IP-based networking and other products. Although Cisco is taking steps to lower its cost structure by reducing headcount, it is not ignoring growth opportunities.

Cisco is on an acquisition spree and as a part of its expansion strategy it has made quite a few acquisitions this year. Last month, Cisco acquired Meraki, Cloupia and Cariden for $1.2 billion, $125 million, and $141million, respectively, as part of its cloud and networking expansion strategy. The company’s first-quarter earnings of 44 cents beat the Zacks Consensus Estimate by 3 cents. Reported revenue was up 5.5% from the year-ago quarter.

We believe that these acquisitions will broaden Cisco’s customer base and network offerings, providing the company with a significant competitive edge over its peers, namely Juniper Networks, Inc (JNPR), Hewlett-Packard Company (HPQ) and F5 Networks, Inc (FFIV), which have been picking up market share.

Currently, Cisco has a Zacks #2 Rank (Buy).

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