Cisco Systems (CSCO) recently announced that it agreed to acquire privately held Arch Rock Corp., which specializes in wireless network equipment for smart grids. Cisco did not say how much it was paying for the company.
The networking giant said the acquisition would help it beef up its IP-based, end-to-end smart grid offerings, adding that Arch Rock complemented its recently announced strategic alliance with smart meter provider Itron for the development of solutions that enhance smart-metering technology.
Arch Rock’s technology helps utilities to connect smart meters and other devices over a scalable, secure, multi-way wireless mesh network. Its sensors help monitor heat and other environmental conditions for effective energy use. San Francisco-based Arch Rock will become a part of Cisco’s smart grid business unit.
The aging grid system has necessitated the need for controlling energy use and improving overall energy efficiency. Pike Research estimates the U.S. smart grid market to grow to $200 billion in the next five years. However, it remains to be seen how Cisco manages to boost its smart grid strategy by tapping a relatively small North American market that only has about 3100 utilities.
Cisco has grown its operations through acquisitions and the latest deal – the second in as many days – appears to be an attempt on the part of Cisco to offer not only end-to-end smart-grid offerings but also enter the turf of utility companies.
Cisco expects to complete the acquisition in the second half of this calendar year. The company said the acquisition further positions it as a strategic partner to utilities working to better manage power supply and demand, improve the security and reliability of energy delivery, and optimize operational costs. The company, which started moving to the smart-grid space in 2009, has been in talks with utilities such as Duke Energy Corp (DUK) and NextEra Energy Inc. (NEE) for providing end-to-end smart grid solutions.
We have a Zacks #3 Rank (short-term Hold recommendation) on Cisco shares.
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