Cisco Invests $100 Million in Insieme With Option to Buy

Cisco Systems Inc. (CSCO), the world’s biggest maker of computer-networking equipment, invested $100 million in Insieme, a networking startup, securing the option for a buyout, as it seeks to boost a turnaround with new product offerings.

An acquisition of Insieme, a company focused on research and development in the datacenter market, for an additional $750 million, would be a so-called spin-in as the startup was created with Cisco funding, the company said in a memo sent to employees on April 17 and obtained by Bloomberg News.

“Insieme’s product development efforts are complementary to that of Cisco’s current and planned internal investments,” San Jose, California-based Cisco said in the memo. “These types of investments have strongly benefited Cisco in the past, and we will continue to look for similar ways to complement our internal development capabilities.”

Cisco, which has pledged to seek technology acquisitions and add more profitable products as part of a turnaround plan, agreed to buy NDS Group Ltd. for about $5 billion last month to tap demand for next-generation video services. The investment in Insieme signals Cisco’s efforts to deepen expertise in a new area of computer networking where software handles the tasks typically done by more expensive networking hardware.

Insieme was founded by three Cisco employees, Mario Mazzola, Luca Cafiero and Prem Jain in January, who together have previously sold two companies to Cisco.

The investment was earlier reported by the New York Times.

To contact the reporter on this story: Jordan Robertson in San Francisco at jrobertson40@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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