Cisco Buys Software Maker BroadSoft for About $1.9 Billion

(Bloomberg) -- Cisco Systems Inc. agreed to buy BroadSoft Inc. for about $1.9 billion to expand further into software and cloud services.

The $55-a-share cash offer announced Monday is a 28 percent premium over BroadSoft’s closing price on Aug. 29, a day before Reuters reported that the Gaithersburg, Maryland-based company was working with bankers to pursue a possible sale. The acquisition is expected to close during the first quarter of 2018, Cisco said.

Cisco has had an acquisitive year as Chief Executive Officer Chuck Robbins adapts to a shift in the networking industry toward less-expensive software-based services and away from traditional hardware, which provides Cisco with most of its revenue. The San Jose, California-based company had announced eight acquisitions in 2017 before today’s deal, according to data compiled by Bloomberg.

BroadSoft, which had a market value of about $1.7 billion based on Friday’s close, had been working with Jefferies Group to seek suitors. It earlier attracted interest from buyout firms Searchlight Capital Partners and Siris Capital Group, people familiar with the matter said Oct. 4. Bloomberg reported on Sunday that an agreement with Cisco was close.

The deal gives Cisco a major new presence in cloud-based communications products and services, a segment of the market it has been lacking in until now, said Jason Noah Ader, an analyst at William Blair & Co. Cisco already is a leading provider of communications for companies, but BroadSoft’s business is focused on providing those services through the internet and hosting them in the cloud.

“Cisco has been a little bit behind the curve there,” Ader said. Buying BroadSoft “allows them to be a leader in the cloud instead of a challenger.”

BroadSoft operates in about 80 countries, according to its website. Founded in 1998 by former Alcatel USA vice president Michael Tessler and Celcore executive Scott Hoffpauir, the company went public in 2010. Tessler serves as chief executive officer.

Cisco paid $3.7 billion to acquire AppDynamics Inc. in March and in May, it agreed to buy software-based networking startup Viptela Inc. for $610 million.