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Cisco Systems Inc CSCO

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Morningstar’s Analysis

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Cisco Raises Acacia Acquisition Price to $4.5 Billion for Optics Capabilities; Maintaining $48 FVE

Mark Cash Equity Analyst

Analyst Note

| Mark Cash |

Narrow-moat Cisco Systems has agreed to purchase Acacia Communications for $4.5 billion, or about $115 per Acacia share in cash. This is an update from the original July 2019 proposal worth $2.6 billion. Earlier this year, Acacia terminated the prior merger after stating that Cisco did not obtain the proper approval from the Chinese government for the deal before Jan. 8. After the termination, Cisco initiated legal action, claiming it had received the required approval, and Acacia countersued. The updated deal is expected to close in the first quarter of fiscal 2021. After updating our model for the increased purchase price, we are maintaining our $48 fair value estimate for Cisco and see the shares as slightly undervalued.

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Company Profile

Business Description

Cisco Systems, Inc. is the world's largest hardware and software supplier within the networking solutions sector. The infrastructure platforms group includes hardware and software products for switching, routing, data center, and wireless applications. Its applications portfolio contains collaboration, analytics, and Internet of Things products. The security segment contains Cisco's firewall and software-defined security products. Services are Cisco's technical support and advanced services offerings. The company’s wide array of hardware is complemented with solutions for software-defined networking, analytics, and intent-based networking. In collaboration with Cisco's initiative on growing software and services, its revenue model is focused on increasing subscriptions and recurring sales.

Contact
170 West Tasman Drive
San Jose, CA, 95134-1706
T +1 408 526-4000
Sector Technology
Industry Communication Equipment
Most Recent Earnings Oct 31, 2020
Fiscal Year End Jul 25, 2021
Stock Type High Yield
Employees 77,500

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