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Cisco closes in on potential $2B BroadSoft acquisition deal

Cisco closes in on potential $2B BroadSoft acquisition deal

The deal could allow Cisco to further diversify away from its stagnating switches and routers business

Cisco Systems, the world’s largest networking gear manufacturer, is nearing a deal to buy US telecommunications software firm, BroadSoft, for close to US$2 billion, a person familiar with the matter has said.

The deal, which comes after reports first emerged in August that BroadSoft was exploring a sale, would allow Cisco to further diversify away from its stagnating switches and routers business by giving it a stronger foothold in selling unified communications software to big telecommunications firms.

If deal negotiations are completed successfully, Cisco's agreement to buy BroadSoft could be announced as early as Monday, the source said, asking not to be identified because the deal discussions are confidential.

Cisco declined to comment. BroadSoft did not immediately return a request for comment. Bloomberg News reported earlier on Sunday that Cisco was close to a deal to acquire BroadSoft.

With its traditional business of making switches and routers seeing revenue declines, Cisco, like other legacy technology firms, has been focusing on high-growth areas such as security, the Internet of Things and cloud computing.

The BroadSoft deal would be Cisco's second major acquisition this year following the US$3.7 billion acquisition of privately-held AppDynamics in March.

BroadSoft shares had closed at US$54.90 on Friday, giving the company a market capitalisation of US$1.67 billion.

Based in Gaithersburg, Maryland, BroadSoft provides software and services that enable mobile, fixed-line and cable service providers to offer unified communications over their internet protocol networks.

BroadSoft has historically sold its products to large telecommunications companies such as Verizon Communications and AT&T, which then resell the software to their business customers.

BroadSoft has recently tried to revamp its business model to sell directly to these customers, a move that risks its relationships with its telecommunications partners, according to a Barclays Plc research report.

New York-based hedge fund P2 Capital Partners LLC owned a 4.6 per cent stake in BroadSoft as of the end of June, according to Thomson Reuters data. P2 has often behaved as an activist shareholder and has even offered to buy companies in which it has invested.

Another BroadSoft shareholder with a history of acquisitions is buyout firm KKR & Co LP, which is BroadSoft’s 13th-largest shareholder, according to Thomson Reuters data.

(Reporting by Liana B. Baker in San Francisco; editing by Diane Craft)


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