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Cisco's (CSCO) Acquisition of Banzai Cloud: Major Takeaways

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Cisco Systems CSCO recently announced its plan to buyout Banzai Cloud to augment development of Kubernetes-based cloud native applications.

The acquisition is projected to conclude in second-quarter fiscal 2021, subject to customary and regulatory approval. However, the financial terms of the deal have not been revealed by either of the companies.

Banzai Cloud will become a part of Cisco's Emerging Technologies and Incubation (ET&I) Group, post the closure of the transaction.

Headquartered in Budapest, Hungary, Banzai Cloud is a privately-held company. The company specializes in assisting enterprises with cloud native application development, implementation and scalability as well as management of containerized applications.

Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. Price and Consensus
Cisco Systems, Inc. Price and Consensus

Cisco Systems, Inc. price-consensus-chart | Cisco Systems, Inc. Quote

In October 2020, Cisco announced the acquisition of Tel Aviv-based start-up Portshift. The company specialises in assisting clients to protect their containerized applications deployed on Kubernetes platform from coding to runtime. Portshift’s security platform automates the encryption of data across services and detects misconfigurations across applications that pose risk to data safety.

In a blog post, Liz Centoni, Senior Vice President, ET&I stated that the Banzai Cloud and Portshift acquisition will enable Cisco to boost its hybrid and multi cloud applications development and advance digital transformation for Cisco’s customers.

Abundant Growth Prospects in the Cloud Market

The implementation of hybrid and multi-cloud model to improve scalability as well as achieve better resource utilization is gaining mainstream adoption.

Per a Mordor Intelligence report, global hybrid cloud market is envisioned to reach $128.01 million at a CAGR of 18.73% between 2020 and 2025. 

Further, increasing migration to cloud and rapid adoption of DevOps is expected to boost market growth for containerized applications, per Industry Research report. The worldwide application container market is anticipated to reach $5011. 5 million at a CAGR of 25.8% from 2021 to 2026.

Consequently, this will boost market for security solutions required for managing the containerized applications.

The global container security market will be driven by increasing cyber-attacks across containerized platforms along with higher demand for microservices and escalating need to comply with strict regulatory requirements, per a Veritis report. Global container security market is projected to witness a CAGR of 30.9% between 2019 and 2024, added the report.

Cisco is acquiring a large number of companies (CloudLock, Duo Security, OpenDNS, Sourcefire, Neohapsis and ThreatGrid) that have expanded its products’ portfolio and enabled it to capture a larger share of the cloud as well as the cloud security solutions’ market.

Nevertheless, these acquisitions necessitate significant amount of investments and as a result are likely to keep Cisco’s operating margins under pressure at least in the near term. Moreover, the company is bearing the brunt of weakness in enterprise IT spending due to coronavirus crisis and that might impact the demand for its offerings.

Zacks Rank and Key Picks

Cisco currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector worth considering are Jabil JBL, Cadence Design Systems CDNS and NVIDIA NVDA. Jabil sports a Zacks Rank #1 (Strong Buy), while Cadence and NVIDIA carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Jabil, Cadence and NVIDIA is currently pegged at 12%, 15.4%, and 20.1%, respectively.

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