Cisco to buy networking software maker Tail-f Systems 

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The Networking Giant Cisco Systems Inc said it would buy privately held Swedish networking software maker Tail-f Systems for about $175 million to expand its network management and automation business. 

Tail-f employees will join the network equipment maker's cloud and virtualization group. The deal is expected to close in the fourth quarter, Cisco said on Tuesday. 

Real opportunity for Cisco
Tail-f will become part of Cisco's Cloud Virtualization Group headed up by Gee Rittenhouse, and while Lundberg says the whole team is moving across to its new parent, he's not sure the company name will survive.

Heavy Reading Senior Analyst Caroline Chappell says if Tail-f is going to become part of Cisco, then the Cloud Virtualization Group is the best place for it to be. "That part of Cisco needs to support multi-vendor capabilities, so that's a good sign, but there will be elements within Cisco that will fight against that. It'll be interesting to see what sort of company Cisco can be — this is a real opportunity for it to show that it can be an open company."

Chappell compares Cisco's opportunity to that of IBM in the late 1980s, when the mainframe giant transformed itself into a software-and-services company and came out a better, stronger company.

Hot property
With its Tier 1 operator support, Tail-f has been attracting the attention of multiple large companies that also wanted to buy the company, according to the industry rumor mill.

So was there a bidding war? Lundberg refused to comment at all on whether Tail-f had been approached by other suitors, but Heavy Reading's Chappell believes that Cisco won the day in a competitive bid.

The returns look decent for Tail-f's investors, though Lundberg wouldn't talk about how much Tail-f had raised from its backers. He did, though, note that the most recent round of funding was in May 2013. Prior to that the company appears to have raised only about $6 million, with SEB Venture Capital the lead investor.