Cisco to Pay $1.4 Billion for Internet-of-Things Company Jasper

Networking giant Cisco Systems has agreed to pay $1.4 billion for Jasper, a Santa Clara, Calif.-based company that focuses on technology for connecting smart devices to the Internet — the so-called Internet of Things.

Jasper had raised about $205 million in venture capital investments from Sequoia Capital and Benchmark and more recently from the private equity fund Temasek. Having reached a valuation north of $1 billion, it was considered a candidate for an IPO.

The company makes cloud-based control software that helps companies connect machinery and equipment ranging from vending machines to farming equipment on the Internet. Among its 3,500 customers are the GPS company Garmin, greeting card giant Hallmark and the jet engine manufacturing division of GE.

In a statement, Cisco said it intends to build upon Jasper’s efforts by adding industrial-grade Wi-Fi and improving its ability to analyze data gathered from devices.

Steve Hilton, an analyst with MachNation, a firm that tracks the IoT industry, said the move will make it easier for companies contemplating IoT deployments to work with a single player. “Enterprises will no longer have to use multiple vendors to manage their environments,” he said.

“Jasper in the industry is viewed as the leading IoT platform,” Cisco senior VP Rowan Trollope said on a conference call. “It solves the problems that come about when you attempt to connect at scale and to do it globally. … What that means for our customers is that they can connect a car, a jet engine, a pacemaker or an ankle bracelet easily. Many of our customers are looking to transition from offering static products to offering a connected service.”

Cisco stock fell 20 cents in after-hours trading to $22.90 a share.

One fact about the deal for Cisco: The company has been slowly shifting its mix of revenue away from selling products that customers pay for once and toward recurring revenue services where customers pay as they go. A key figure that I’ve been watching in Cisco’s earnings reports has been deferred revenue — essentially money that Cisco knows is coming in but which it hasn’t booked yet.

That figure rose 10 percent to $15.2 billion in Cisco’s most recently reported quarter. Part of that mix comes from recurring revenue of the sort that Jasper brings in as a cloud service. CEO Chuck Robbins has emphasized recurring revenue as a priority in the company’s ongoing M&A strategy. We’ll probably get more color about Robbins’ thinking here when Cisco reports its second-quarter earnings next week.

This article originally appeared on Recode.net.

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