Thursday, July 18, 2019

Cisco Plugs In Another Acquisition

As I lamented in the comment section of my last article on Cisco (CSCO), it's a particular curse of investment writing that companies will sometimes post meaningful news in between the time you submit an article and it's published, and that happened last week with Cisco's announcement of its intended acquisition of Acacia (ACIA).

I don't think the acquisition of Acacia is an unalloyed positive for Cisco, nor without some risks, but it is very consistent with Cisco's demonstrated strategy to shift away from M&A as a tool to enter new markets and towards using it as a tool to strengthen its capabilities in existing businesses. Coherent optics and pluggable modules are definitely a credible area for Cisco to focus, and I don't completely discount the possibility that Acacia, combined with the earlier deal for Luxtera, will help Cisco's lagging efforts among hyperscale customers. On balance, this is a credible use of shareholder capital, but not one that changes my basic view on Cisco, which is that of a good company, but not a compelling stock to me right now.

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Cisco Plugs In Another Acquisition

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