Cisco (Nasdaq: CSCO) exceeded estimates in reporting fiscal first quarter results in November. Revenue improved 6% to $11.9 billion, while adjusted earnings grew 12% to $0.48 a share. Analysts were hoping for $0.46 on $11.8 billion in sales, leading investors to bid up the stock more than 8% following the report.

Structurally, the business is about as strong as it's ever been. Cisco holds about $16.3 billion in debt versus $45 billion in cash and short-term investments. Free cash flow came in around $2 billion, more than enough to fund a $0.14 quarterly dividend that yielded 2.9% as of this writing.

Even so, investors are rightly more interested in the cash Cisco is using to acquire businesses:

  • On Nov. 15, Cisco announced a $125 million bid for Cloupia, whose tools help automate complex data centers. A single management console allows administrators to oversee both physical and virtual network elements as a combined whole.
  • On Nov. 18, the company agreed to spend $1.2 billion for Meraki, an upstart backed by Sequoia Capital and Google, whose technology is used for managing low-cost Wi-Fi networks via the cloud.
  • On Nov. 29, Cisco acquired Cariden for $141 million. The company's technology is used by telecommunications carriers to optimize the way voice, video, and data traffic is delivered over an increasingly complex and mobile network.

See the pattern here? No longer content with supplying network equipment, Cisco is seeking to be an all-in-one service provider for building, extending, and managing large-scale networks. Call it a bid to own the pipes underpinning the cloud. Or, just call it smart. This is a big growth opportunity that's still in its formative stages.

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