Cisco wagers $1.4 billion on 'Internet of Things'

Cisco's new CEO Chuck Robbins has emphasized his commitment to IoT, or the Internet of Things. He's backing it up with his wallet.

The computer-networking Goliath said on Wednesday that it's spending $1.4 billion on Jasper Technologies, a software developer that allows businesses to manage connected devices from beer kegs and vending machines to cars and security systems.

It's Cisco biggest deal since the 2013 purchase of cybersecurity company Sourcefire for about $2.5 billion. While Cisco is known as one of Silicon Valley's most aggressive acquirers, Jasper marks only the seventh billion dollar plus deal since 2000, according to FactSet.

Robbins has been on an acquisition spree of sorts since taking over for John Chambers in July. He's orchestrated seven purchases, including the $700 million deal for video-conferencing start-up Acano.

IoT is an acronym that Robbins trots out frequently, and for obvious reasons. According to Gartner, the number of connected devices in use globally will quadruple by 2020 to over 20 billion. As the world's largest developers of routers and switches, Cisco sits at the guts of the network, making sure that traffic flows smoothly across desktops, phones, servers and beyond.

Smartphones have driven the recent surge in IoT, but as businesses look into the future, seemingly everything is connected. From cars, watches and drones to the heating, lighting and refrigeration systems throughout offices and stores, data is flowing and being captured everywhere.

To stay relevant, Cisco needs to provide the backbone that enterprises rely on for connectivity, stability and security. That's because much of Cisco's traditional business is being gobbled up by the cloud as companies dispose of clunky expensive hardware and proprietary systems.

Rowan Trollope, Cisco's senior vice president of IoT, was put in charge of the unit four months ago.

"My first order of business was to look at the strategy and see what we could do to accelerate it," said Trollope, who also runs the collaboration group. "I spent a lot of time on the road talking to customers and partners about what are the challenges you're still running into. That was an area where Jasper came up over and over again."

Jasper has been in the business of connecting devices since way before there were many to connect. The company was founded in 2004, three years before the first iPhone was released, and operated in relative obscurity until fairly recently. Its biggest strength is in the auto sector, where customers include General Motors and Ford.

Cisco's traction in IoT today has been in areas like industrial, oil and gas and public sector.

In July, Jasper forged a deal with Microsoft to bring its technology to companies using the Azure cloud, and signed a similar agreement with IBM three months later.

Cisco's purchase price is comparable to Jasper's private market valuation from when it last raised money in 2014. That's not a surprise given the plunge in financial markets to start the year and the challenging environment many high-priced start-ups encountered after going public in 2015.