November 20, 2012, 3:34 PM — Meraki Networks, the tiny, privately held WLAN vendor that Cisco earlier this week announced it will buy for $1.2 billion, is as different from Cisco as night is from day.
Cisco has built a billion-dollar business with a controller-based, enterprise-grade wireless LAN offering, based on its 2005 acquisition of Airspace, for which it paid "just" $450 million. Cisco has consistently controlled about two-thirds of the traditional enterprise WLAN market ever since.
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Meraki and other vendors, such as Aerohive, developed alternatives to the controller-based WLAN architecture, reducing capital and operational costs, and simplifying network management. Meraki in particular went to great lengths to move controller functions into a cloud service, accessed by a Web interface that was simplified and streamlined for its target market of smaller, mid-range businesses. In 2011, Meraki added the MX line of routers to its cloud-based networking portfolio.
According to the companies' joint statement, Meraki's share of the market is tiny by comparison to its vastly larger acquirer: Meraki had an annual revenue run rate of just over $100 million, and only recently became "cash flow positive." Meraki has posted an FAQ about the deal on its website.
Sujai Hajela, vice president and general manager of Cisco's Enterprise Wireless Networking Group, spoke with Network World about the reasons for the buy and Meraki's role in the network giant's future. He was actively involved in the negotiations.
Why buy Meraki?
When we looked at Meraki, we saw their software-based business model, and a [WLAN] platform built from the ground up to let customers easily service a network from the cloud.
What do you mean by "software-based business model"?