Ubiquiti Networks (UBNT, Financial) has been pretty volatile over the last few weeks. Despite the company not reporting good quarterly numbers, the stock is up over 10% this year. There are several factors that can push the stock much higher than present levels. One such reason is a potential buyout by Cisco (CSCO, Financial). Cisco has been pretty active on the acquisition front over the past few years, and the company even sold $8 billion worth of bonds last year. Needless to say, Cisco has enough money to buy out Ubiquiti. Ubiquiti can help Cisco overcome several weak points. Let’s take a look at the reasons why I think Ubiquiti can be a potential buyout target for Cisco.
Wireless internet service provider industry
Wireless Internet Service Providers, or WISPs, are widespread in North American and European locales with lower population where a cable organization may not see any positive returns in venturing into. As superior internet demand expands and extends to a bigger segment of the populace, WISPs are becoming cheaper and more affordable, and versatile alternative to cable based systems even where cable as of now exists. In many cases, WISPs can give quicker speeds than link by joining the base station to a fiber arrange that can accomplish paces of up to 450 Mbps.
This is benefiting Ubiquiti and will continue to benefit the company in the long-run as the demand for high speed internet is expected to rise. In addition, the company isn’t even facing stiff competition in this segment and has the industry pretty much for itself. Although the likes of Cisco and Ruckus Wireless (RKUS, Financial) are competing against Ubiquiti, the companies haven’t invested heavily in the market. Given the heavy exposure of Ubiquiti, it would make sense for Cisco to acquire the company in order to gain traction in this fast growing market. Ruckus Wireless isn’t expected to expand its footprint in the WISP industry, which will give Ubiquiti the time to dominate the space. Given the market’s potential and Ubiquiti’s increasing presence, it would make sense for Cisco to buyout the company dominate this space. Even if Cisco doesn’t acquire Ubiquiti, I think it will continue to move higher due to the growth in demand for high speed internet.
New products
Innovation has always been a weak point for Cisco. On the contrary, Ubiquiti Networks has been pretty active on the innovation front and this could be another reason why Cisco can acquire Ubiquiti.
Ubiquiti recently released new products like UniFi Video Camera Micro and UniFi Video software, reinforcing its UniFi Video administration portfolio. UniFi has grown at a quick clasp amid the previous three years. This can be a big tailwind, as the organization anticipates that the growth speed will continue with UniFi getting to be greater than airMAX and open air remote.
In addition, the organization plans to unveil gigabit Ethernet router, EdgeRouter X which will diversify its product portfolio and propel growth. Given Cisco’s weakness, it would make sense for the company to buyout Ubiquiti Networks.
Conclusion
Given Cisco’s history of acquisitions, I think buying Ubiquiti will be an ideal option for the company. Ubiquiti’s presence in the WISP market, along with its ability to innovate, makes it a perfect acquisition candidate. Even if Cisco doesn’t buyout, Ubiquiti has many tailwinds going forward, which is why I think investors should buy the stock.
