Sheer Delight for Cisco

Having raised the hopes of nearly every privately held networking security vendor with its recent acquisition splurge in that sector, Cisco Systems Inc. (Nasdaq: CSCO) has turned its M&A attentions to OSS (see Cisco Nets NetSift for $30M, Cisco Buys Startup for $1.2M per Employee, and Cisco Chomps FineGround).

Today Cisco said it's buying network management specialist Sheer Networks Inc. for an initial sum of $97 million in cash and assumed options (see Cisco Buys Sheer Networks).

That sum could go up by a further $25 million if unspecified development and product milestones are met. Maybe Sheer, which peddles service fulfillment, fault management, and auto-discovery software tools for IP networks, will be given a target of 90 days to transform itself into a security company if it's to get the extra greenbacks (See Sheer Offers Triple Play OSS, Sheer Intros BOS for IP Networks, and Sheer Supports IP-VPN Services.)

So, Cisco could possibly pay $122 million for an OSS company with annual revenues "way less than $30 million," according to OSS Observer analyst Patrick Kelly. "That seems like a very high premium to me."

Kelly notes that Sheer "stumbled a few years ago and changed its top management, and his since won a couple of carrier deals." (See Ghez Who's Sheer's New CEO, Sheer Bags Telmex OSS Deal, and Korea Telecom Uses Sheer OSS.)