Cisco Acquires Enterprise Wi-Fi Startup Meraki For $1.2 Billion In Cash

http://techcrunch.com/2012/11/18/cisco-acquires-enterprise-wi-fi-startup-meraki-for-1-2-billion-in-cash/

by ardahal • 14 years ago

155 44 14 years ago

helper• 14 years ago

Congratulations to the Meraki team. I was hoping to see them make more of a run on the wireless incumbents, but I can understand that 1.2b was too much to pass up (considering Aruba's market cap is only 2.1b).

kanzure• 14 years ago

Well, looks like pg called it on this one.

"MAKE HARDWARE WITH NON-SUCKY SOFTWARE."

"okay"

"Here, have a billion."

Obviously, I am omitting all of the actual work for entertainment value. Edit: isn't a YC company, I don't want to confuse things.

http://ycombinator.com/ideas.html

"27. Hardware/software hybrids. Most hackers find hardware projects alarming. You have to deal with messy, expensive physical stuff. But Meraki shows what you can do if you're willing to venture even a little way into hardware. There's a lot of low-hanging fruit in hardware; you can often do dramatically new things by making comparatively small tweaks to existing stuff."

watty• 14 years ago

Calling their solution "non-sucky" is an understatement.

samstave3• 14 years ago

Can you elaborate?

You're saying they suck?

Can you explain exactly why... as a tech design integrator fro major clients who really like and use them - I need to know how they suck in a very specific way so I may avoid such mistakes....

wait... areyou saying they are way far above non-sucky?

Sorry the song of your people is foreign to me.

stbtrax• 14 years ago

To be fair most of their hardware started off(not sure if this is still the case) as OEM networking boards, they weren't venturing into the depths of maintaining signal integrity, verifying multiple revisions of hardware, and other electrical testing.

codemac• 14 years ago

How fortunate in the short term, and unfortunate in the long term.

< removed long cynical rant about Cisco and handling of IronPort >

(funny story, Cisco's workplace resources group's bonuses are based on (total revenue) / headcount+workplace costs. Instead of incentives based on retention and growth, the group gets a bigger bonus every time a group is downsized, or they close an office.)

samstave3• 14 years ago

I just hope that they don't have the same result as the acquisition of Airespace in ~2006...

Airespce brain trust cashed out and jumped out and left Cisco's wifi product poor at best...

So many mistakes... they have solidified their offering - but if you were an airespce/cisco customer when that happened -- it was horrific.

paul• 14 years ago

I think Meraki was the 4th startup that I ever invested in (first was Wufoo).

When we visited their office in Mountain View, it was full of "Meraki Minis" (their first batch of hardware). I asked how much money they had raised so far, and their response was, "none". They were so scrappy that they had managed to build the first batch (which was partially pre-sold) for practically nothing. And they somehow got the office space for free.

Very impressive team. Glad I invested :)

sown2• 14 years ago

How do you find good hardware companies? They seem to be rare. I imagine they come to you but for someone like me, I am at a loss.

photorized• 14 years ago

That was a good bet, congrats.

amalag• 14 years ago

I gotta ask, I was looking for some access points for a small company. How does meraki compare to the super cheap http://www.open-mesh.com/

which seems to have some nice software as well. Is Meraki really aimed towards enterprise who can justify $1000 access points?

shy_coder• 14 years ago

They have some pretty amazing stuff. I recently attended one of their webinarsa and received a free AP + License. I used to push Ruckus because I was really familiar with them. Meraki is hands down a much better product.

newman314• 14 years ago

One of the things mentioned in the acquisition FAQ was that one of the key differentiators was the Meraki business model.

Can anyone shed more light on exactly what is different?

EDIT: Also, since I have never priced any of their gear before, any idea on ballpark costs (list) would be nice.

flyt• 14 years ago

Cisco: Buy hardware and associated licenses to use them with a WiFi control "box", then purchase optional support contracts to receive replacements/repairs when/if hardware breaks.

Meraki: Buy hardware and a time-based license per unit, typically for three years. No additional costs.

With the Cisco gear you can buy hardware and essentially use it forever just for the upfront cost. With Meraki you buy the hardware then pay on a regular basis to Meraki to continue using it with their cloud control software.

wmf• 14 years ago

I guess there are two things. Their management tools are SaaS, with all the benefits that brings. This was originally considered pretty radical since many customers viewed the cloud as unreliable and insecure.

Also, their equipment apparently turns into a brick if you stop paying your support contract (because you'd no longer have any way to manage it). This is not really a problem for many customers who have a policy of keeping active support contracts on everything, but it goes against what people are used to.

samstave3• 14 years ago

Further more - Cisco lead times are HORRIFIC - Meraki, 2 days...

EDIT: just to clarify - very large enterprises like to get their orders directly from Cisco, with a middleman to cover the "non-direct" status in order to apreciate the largest discount they can (typically ~47-49%)... this eliminates the overhead of dealing with ordering out of distribution - but it murders your lead times and deliverability...

Meraki was one of the most up-front straight forward orders: "Yeah it's in stock and in Fremont - we can have it to you next day, or 4 hours, so no need to order a spare MX400..."

pebb• 14 years ago

Interesting, never realized they offer a free MDM (MAM) solution.

dbarlett• 14 years ago

There's not a lot of documentation, but Systems Manager is solid. I've been testing the Android client and found it stable and well-behaved.

brianjolney• 14 years ago

we replaced Casper suite for Meraki's free MDM solution, has been amazing for us. Just recently started to test some of their AP's, and have been really impressed.

dm8• 14 years ago

Congrats to Meraki team. Another exit for Sequoia. Looks like they had an excellent year where companies like Palo Alto Networks, Kayak, LinkedIn that went public (and doing well). And companies like Instagram, Meraki got acquired for north of billion dollars.

sown2• 14 years ago

Neat.

Every time I find a company that I think is worth working for, I spend time on a good cover letter to try to get interest or even play around with their API and build something simple. Meraki was one of those companies I cared enough to write about, I believe, but I never heard back from them. I seem to not be good enough to be hired but good enough to recognize the best, lol.

Perhaps I should start a newsletter.

lsllc2• 14 years ago

I wonder how similar this is to Ubiquiti's UniFi enterprise WiFi system. I'm a big fan, UniFi is just excellent as is their point to point/WISP solution airMAX, very inexpensive too. For example, I recently set up an airMAX 280Mbps point to point link over about 1/2 mile using 2x Nanostation M5's for ... $140! Their airFiber system gives you 1.4Gbps over up to 10km for about $2.5K for the pair of radios.

http://ubnt.com

jauer3• 14 years ago

Different markets. Ubiquiti's software is no where near as polished as Meraki. Ubiquiti is working on a cloud controller function to reduce the barrier to entry for some of their products.

ricardobeat• 14 years ago

Their product lines are already based on cloud controllers, and despite some minor quirks (java, adobe flash…), the software is reasonably polished. But their main selling point are cost and hardware quality, their hardware is at the same time amazing and cheap, and the controller software is free. They sell like water around here.

Very recently I saw the deployment of a network with some 12 APs using Cisco hardware, estimated cost ~$20k (without the software licenses), and it ended up not working very well. The same setup would cost around $1500 with Ubiquiti, and zero software licenses.

lsllc2• 14 years ago

I haven't seen the Meraki software, but what I have seen of the Ubiquiti software is excellent. The UniFi controller does in fact run in the cloud. Granted they could do more on the cloud front in terms of having something pre-built that you can activate with a click.

I'm not sure I'd want my wireless controller in the cloud though, I like the fact that the UniFi controller runs on anything from an 12 core x64 down to a single core ARM board depending on the size of your installation.

ayanb• 14 years ago

Congratulations Meraki, very well deserved!

I just wonder if they had continued their run, could they have IPO-ed at a much higher valuation? They seem to have both very strong product and business fundamentals. Would love to hear thoughts on this..

ChuckMcM2• 14 years ago

Congratulations guys (if you're reading). I'm sure this has nothing at all to do with Ruckus going public [1] :-) Its a great exit and Cisco certainly has the manufacturing and marketing reach to take you to the next level.

That said, I find it fascinating that my first experience with wireless gear was with Aeronet (which was also $1B+ buy for Cisco) And of course Linksys ($1B+). And now Meraki ($1B+) So here is the multi-billion dollar question, "Why does Cisco keep spending billions of dollars on WiFi companies and still they aren't leading the market in WiFi innovation?"

[1] http://www.ruckuswireless.com/press/releases/20121116-ruckus...

jauer3• 14 years ago

Cisco as a company can't do the kind of "out of the box" R&D that's necessary for significant innovation. When Cisco wants something truly new they go acquire a outside company.

That said they've done a fairly good job of growing those companies within their area (Aeronet as Enterprise, Linksys as Home) through incremental improvements.

This may be intentional behavior on Cisco's part to control their exposure to large project failures. IIRC there've been cases where Cisco employees couldn't get support to develop something new so they quit and once Cisco saw their success they were acquired back in.

sinkercat• 14 years ago

Cisco has the highest market share in wireless and it is Cisco's innovation in wireless that's keeping it ahead of Ruckus, Aruba and Motorola. Don't understand the conclusion that Cisco can't do "out of the box" R&D, at least in wireless.

jamie2• 14 years ago

It's even worse than that:

http://newsroom.cisco.com/dlls/2005/corp_011205.html

Airespace wireless for $450MM.

ChuckMcM2• 14 years ago

Interesting, I mis-remembered the Aeronet price apparently it was $799M [1]

[1] http://news.cnet.com/Cisco-buys-Aironet-for-799-million/2100...

SatvikBeri• 14 years ago

The Innovator's Solution goes over this in detail, using Cisco as a prominent example.

The incentives at large companies basically make certain types of innovations very difficult to create from within. Large companies tend to have a very fixed set of cost structures and margins. That means that products that would be lower margin are almost automatically deprioritized-even with specific CEO attention it's nearly impossible to change resource allocation processes to foster this kind of innovation.

Instead, the recommended option is to create a subsidiary with no existing cost structure or processes. That subsidiary can then focus on making the new product succeed since it's the only way for them to survive.

Once the subsidiary takes off, you usually do not want to fold it back into the main organization-you'll lose all the advantages that allowed it to succeed in the first place! (There are exceptions, and the book goes into detail on when to integrate and when to give the subsidiary autonomy.)

Buying up new companies is another alternative to starting subsidiaries yourself.

daemon13• 14 years ago

That is Cisco's innovation strategy for the last 10-15 years.

They "outsource" R&D/Innovation to smaller companies and then buy those.

Hence, their special skills as a company are:

1. Identify future growth areas [market segments] and potential leaders.

2. Seamlessly merge the acquired company into Cisco operations.

There was a good article about this in Fortune/Forbes 6-8 years - did not keep the link.

gonzo• 14 years ago

I'm one of two people to explain to Cisco why they should buy Aironet (spelling, Chuck!), instead of Symbol...

largely on the fact that their software was better.

yellowbkpk• 14 years ago

I remember way back in 2006 or so when Meraki was a startup trying to sell the hardware units geared towards community wifi systems. A short time after getting the units out into the community they 'pivoted' away from that model and started charging for the service: obviously trying to gear their stuff towards business customers.

I'm glad this pivot worked!

j_s• 14 years ago

Interesting to read how this pivot affected customers who no longer fit their business model...

http://www.virishi.net/from-happy-hacking-screw-you-story-me...

http://www.dslreports.com/shownews/Meraki-Annoys-Partners-Cu...

yozmsn• 14 years ago

Nice to see startups still being bought for the products and not just the talent

netvarun• 14 years ago

Interesting article on the CEO, Sanjit Biswas:

Move over, Doogie Howser; here comes Engineer Biswas http://mytown.mercurynews.com/archives/sunnyvalesun/04.29.98...

ksec• 14 years ago

I understand how Ruckus could be doing IPO. Since they actually solve the problem with too many WiFi connections going to single point. Problems we have seen in Hotels, and Apple Expo. etc

How is Meraki different? Since Ruckus is a software + hardware solution.

Meglis• 14 years ago

I might be wrong but the word meraki is one of those greek words that cant be translated in english and means passion to work and develop something. Try it on google translate as μεράκι !

Cisco Acquires Enterprise Wi-Fi Startup Meraki For $1.2 Billion In Cash

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