Cisco Inks Deal To Buy UK’s IMImobile For $730M

Cisco Systems has reached an agreement to snap up IMImobile for an aggregate $730 million, including debt, as the network equipment maker seeks to capitalize on automation tools for customers to better interact with users.

IMImobile shares spiked 47% in UK trading. According to the agreed terms, Cisco (CSCO) will pay 595 pence per share in exchange for each share of IMImobile. The price tag translates into a 48% premium to the cloud communication software company’s closing price of 402.50 pence on Dec. 4. The deal is expected to close in the first quarter of the calendar year 2021.

IMImobile provides software and services for enterprises and organizations to stay constantly connected to their customers through enhanced interactive channels including social, messaging and voice.

With the acquisition, Cisco seeks to offer customer-facing businesses an end-to-end customer interaction management solution, providing faster and smarter interactions. The move comes as more people work remotely or from home, and enterprise customers are increasingly moving towards using Contact Center as a Services (CCaaS) solutions. As such, Cisco’s vision is to provide a comprehensive Customer Experience as a Service (CXaaS) offering to the market, the company stated.

“A great customer relationship is built on consistently enjoyable interactions where every touchpoint on every channel is an opportunity for businesses to deliver rich, engaging and intuitive experiences,” said Cisco’s Jeetu Patel. “We look forward to working with IMImobile to help create a comprehensive CXaaS solution for the market – one that gives businesses a platform to provide delightful experiences across the entire customer lifecycle journey.”

Cisco shares, which have advanced 18% over the past month, are still down 7.5% since the start of the year, as the coronavirus pandemic hit the company’s enterprise and commercial orders due to an overall slowdown in spending. (See Cisco’s stock analysis on TipRanks).

Following Cisco’s release of 1Q results last month, Oppenheimer analyst Ittai Kidron reiterated a Hold rating on the stock with a $45 price target, saying that there are signals that the worst COVID-19 impacts might be behind the company but a return to sales growth might take longer.

“Although negative order patterns are bottoming, a return to consistent YoY revenue growth could be delayed until FY22 when comps become easier and the impact of macro on several key product areas further subsides,” Kidron commented in a note to investors. “We remain cautious given ongoing headwinds but constructive LT [long term] taking into account Cisco’s software/subscription traction, strong BS [balance sheet], robust capital allocation program, cost-cutting initiatives, and compelling valuation.”

Overall, Wall Street analysts are cautiously optimistic on the stock’s outlook. The Moderate Buy consensus is split between 8 Buys and 8 Holds. Meanwhile, the average price target stands at $47.69 and implies 7.5% upside potential in the coming 12 months.