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[CALIFORNIA] Cisco Systems Inc said on Monday it will buy software company BroadSoft Inc for US$1.71 billion, as the world's largest networking gear producer moves away from a stagnating business in switches and routers.
Shares in BroadSoft, which specializes in software used by major cable and telecom networks, rose 1.5 per cent after Cisco offered US$55 per share for the company, giving shareholders a premium of 2 per cent.
Analysts said the purchase gives Cisco a stronger foothold in selling the software big telecoms use to provide integrated mobile, video, voice and other forms of electronic communications.
Cisco shares also rose by more than half a percent in early trading in New York.
"This is a smart acquisition that gives Cisco more firepower to sell into its massive installed base over the coming years,"said Daniel Ives, chief strategy officer at GBH Insights.
"We see minimal regulatory headwinds and also think this is the start to what could be a major wave of tech and telco M&A into 2018." The deal, valued at US$1.9 billion including debt, is expected to close during the first quarter of 2018, the companies said in a statement.
After the deal, BroadSoft employees will join Cisco's unified communications technology group.
Cisco, like other legacy providers, has been focusing on high-growth areas such as security, the Internet of Things and cloud computing.
BroadSoft provides software and services that enable mobile, fixed-line and cable service providers to offer so-called unified communications over their internet protocol networks.
BroadSoft has historically sold its products to large telecommunications companies such as Verizon Communications Inc and AT&T Inc, which then resell the software to their business customers.
The BroadSoft deal is Cisco's second major acquisition this year following a US$3.7 billion deal for privately held AppDynamics Inc in March.
"With BroadSoft ... Cisco will be able to cover a wider swath of the market," Drexel Hamilton analyst Brian White wrote in a note.