Cisco to buy Gaithersburg's BroadSoft for $1.9B

Cisco Near Deal for Software Maker BroadSoft

Cisco Systems Inc. will pick up telecommunications software company BroadSoft Inc.in a $1.9 billion deal, marking the California-based technology company's latest acquisition as it continues a push to grow through M&A, according to a Monday statement.

Cisco, which now earns most of its revenue from the traditional hardware segment, is making a shift toward the less-expensive software-based services.

The deal, which comes after Reuters reported on Sunday that the companies were in talks, will give Cisco a stronger foothold in selling unified communications software to big telecommunications firms. The transaction is scheduled to close in the first half of 2018.

BroadSoft, based in Gaithersburg, Maryland, provides cloud communication services to businesses in about 80 countries, according to its website.

Last year, BroadSoft released a team communications tool called Team-One that has become a popular management program. The vendor now has over 19 million business subscribers. The company is a cloud-based communications software provider. For example, Verizon's One Talk and AT&T's Collaborate leverage BroadSoft's multitenant platform, BroadWorks.

BroadSoft shares were up 1.5 percent before the bell, while Cisco shares were up marginally.

The deal would help Cisco increase its recurring revenue from subscription-based services, which Chief Executive Chuck Robbins has said is core to its growth strategy. Enterprise clients need collaboration tools as well as voice and contact centers to operate modern-day businesses successfully. Its flagship products include BroadWorks, an application platform hosted on-premises by service providers, and BroadCloud, its cloud-based platform for service providers "looking for an accelerated time-to-market with business ready services".

Catherine Trebnick of Dougherty & Co., who has a Buy rating on Broadsoft, writes that the company is "a very attractive asset for Cisco with its broad reach globally as result of their unique sell through model with carriers". Once the buyout is finished, BroadSoft employees will join Cisco's Unified Communications Technology Group, under the Applications Group.

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