Why Cisco and HPE Both Targeted Network Deals


By: R. Scott Raynovich

In the past week, both Cisco (Nasdaq: CSCO) and HPE (NYSE: HPE) have targeted networking acquisitions to fill out their product strategy.

On the surface, it's a sign that both of these large companies aren't done filling out their networking portfolios. Dig deeper, and HPE's acquisition of cellular technology provider Athonet and Cisco's acquisition of cybersecurity provider Valtix show that networking portfolios have to grow to adopt the expanding types of access technology that enterprise networks need -- for example ways to connect to multiple clouds and multiple wireless technologies.

HPE Snaps Up Athonet

HPE last week announced it will be acquiring cellular technology provider Athonet to expand its private wireless offerings in combination with its Aruba wireless networking portfolio.

Based in Italy, Athonet has been developing 4G and 5G mobile core solutions for 15 years. HPE says Athonet has 450 successful customer deployments in various industries, including leading mobile operators, hospitals, airports, transportation ports, utilities, government and public safety organizations.

Private wireless, in which enterprises combine access technologies such as 4G, 5G, and WiFi to provide more robust coverage to their businesses, has been growing in interest in recent years as a way to deliver services such as smart manufacturing, computer vision, and business analytics. Also, many providers of WiFi and other wireless networking solutions have been beefing up their cellular technology as customers look for a wide range of connectivity solutions in their networks.

“With the acquisition of Athonet, HPE now has one of the most complete private 5G and Wi-Fi portfolios for CSP and enterprise customers – and we will offer it as a service through HPE GreenLake,” said Tom Craig, global vice president and general manager, Communications Technology Group at HPE, in the corporate release.

Cisco Buys Valtix

Cisco last Friday announced it was buyuing Valtix, a cloud network security company founded in 2018. Valtix is relatively small and obscure – sources say the company had less than $10 million in revenue. The deal size was not disclosed by Cisco, but it's believed to be in the sub-$150 million range, according to sources we spoke to.

In a blog on the Cisco website, Cisco executive Raj Chopra said the Valtix acquisition is part of Cisco’s strategy to increase visibility and security in networks across clouds.

Valtix says that it can offer packet-level visibility across multiple clouds without agents or additional infrastructure. It also implements policy-based security across multicloud networking with cloud firewall, IDS/IPS, egress filtering, and web applications firewall (WAF) functions. Named customers include Google Cloud, BBPOS, and PayByPhone.

Cisco was a strategic investor in Valtix and expects the deal to close in Cisco’s fiscal third quarter. It had raised a total of $27 million, according to company releases.

Valtix seems like a tiny deal. So I reached out to Steve Mullaney, the CEO of Aviatrix, who is also a Cisco veteran and experienced with M&A. I asked Steve why Cisco would do such a deal now, when everybody has been expecting the “big one”:

"Yes, it is a tiny acquisition. The real reason why now, and what is really interesting, is what Cisco said in their blog..." Mullaney wrote back in an email.

Here's what Cisco's Chopra said in the blog (emphasis provided by Mullaney:

"Across these multiple clouds, one thing stitches all of this together: the network. It is the one place that sees all the traffic that flows between applications and from applications to users, and therefore, is the only place where you have the visibility, telemetry, and policy enforcement needed for consolidated, consistent security."

Mullaney pointed out that Aviatrix agrees with the philosophy, in general. As networking moves to multicloud, it's no longer sufficient to have point solutions such as firewalls. You need to have the security baked directly into the networking fabric.

In both these cases, Cisco and HPE have proven that they'll continue to buy snap-in acquisitions that will be needed as networking functionality expands into both private wireless and multicloud. Maybe the only thing that surprised us was that neither company was a member of the Futuriom 50.