A gathering of Cisco executives with John Chambers perched on the couch's arm, fourth to the right,... [+]
After more than a decade playing the startup game, Jasper Technologies is cashing in. Cisco has announced it is acquiring Jasper for $1.4 billion in a move the company says will give it a full stack for companies looking to manage devices in the 'Internet of Things.' That price tag, however, could mean that Jasper's later-stage investors accurately priced the company when they invested at the same valuation nearly two years ago in 2014.
"Cisco views IoT as a massive opportunity. It's one of the top priorities of the company," Cisco executive Rob Salvagno said on a conference call with analysts and investors. "Jasper has built a platform that has a massive market, with strong strategic alignment for Cisco."
Cisco cited Jasper's geographic reach, with more than 3,500 global customers, as one source of interest . The $115 billion (market cap) company also was attracted to Jasper's recurring subscription business revenue model. But it may have been Jaspers' long-fought partnerships that Cisco found it hardest to replicate as a competitor. "Jasper's been at this for ten years, building this, and they've gotten incredible traction with the service providers," Rowan Trollope, senior vice president and general manager of Cisco's IoT and collaboration technology group, told FORBES in an interview after the call. "It's a big space, and there's a lot to do."
On the call with analysts, Cisco had referred to the combination of its IoT unit with Jasper as creating a full "sandwich" of Cisco hardware with Jasper's software and then Cisco's ability to connect that software with other business systems. "We can extend the reach of Jasper to all of Cisco's global service provider partners," Trollope said on the analyst call. "If you lay a map of Cisco's IoT portfolio over Jasper's, there's almost no overlap. And you can't do one without the other, you need them both."
Jasper, meanwhile, was founded in 2004 and had reportedly sniffed at an IPO in November 2014 for the following year, though such an offering never materialized. The company had built out a network of partnerships with service providers and a business model popular with Wall Street in its consistent, predictable subscription contracts for its software. What that software did, at its most simply, was help manage all the different data streams and connected sensors for a vehicle or system like a car on one platform, Mohammed told analysts on Wednesday. Jasper had raised more than $190 million over its twelve years in existence, most recently at a $1.3 billion valuation, according to Pitchbook (the Wall Street Journal reported it at $1.4 billion).
Cisco and Jasper didn't disclose revenue or other growth metrics for Jasper as part of the deal. But the sales price—flat from its last raise—suggests that Jasper had run into some difficulty expanding beyond its current trajectory, perhaps due to resistance from Cisco higher and lower in the stack. On the analyst call, Salvagno, the Cisco executive, noted that the entire IoT industry is one with major challenges. In an interview, Jasper board member Gaurav Garg called the acquisition one that will accelerate the evolution of the Internet of Things for customers. Though Garg declined to comment on Jasper's price tag and valuation, the Midas List investor said the deal would scale Jasper's business much faster after it had proven it had a competitive product. "Cisco has the scale and the customer entry to attach this to a lot more customers faster, and they have the relationships to take this to a global phenomenon," Garg says.
"We firmly believe in the power of IoT transforming enterprise businesses," Jasper CEO Jahangir Mohammed told FORBES in an interview after the analysts' call. "We asked ourselves, what was a way we could do this in a much larger scale that we can be proud of? And we can be a great catalyst inside Cisco," the cofounder says.
Cisco wouldn't say whether Jasper will continue long-term as an independent business unit or brand within the company, as Trollope said the company still has to figure that out. What is determined: Mohammed will become general manager of the IoT unit reporting to Trollope, and Cisco will maintain Jasper's valuable relationships with service providers as well as its own partnership with Ericcson announced in November 2015. "We have paid special attention to reaching out and having conversations proactively with those folks," says Trollope. "I predict it will go well."
Shares of Cisco had swung up and down but were flat in after-hours trading as of 6:00 pm ET.
