Reorg complete, Cisco hops back on the acquisition trail

Cisco (s csco), an incredibly active acquirer, is ready to start doing deals again, according to CEO John Chambers on the networking company’s financial results call on Wednesday afternoon. Chambers said, “We expect to be more active with acquisitions,” and the company will focus on its five core areas of focus.

Those five areas are switching and routing, the data center, collaboration, video, and architectures for business transformation. In the past year Cisco has done six acquisitions, with half of those occurring in the past three quarters while it was handling its restructuring. As we have documented, Cisco’s previous forays into M&A have helped the company spread its bets on emerging technology around, but they haven’t always helped it boost its bottom line. Cisco also had seemed to lose focus in previous years, letting other firms come into its market and take share.

Based on the financial results at the end of Cisco’s fiscal second quarter of 2012, the company has $46.7 billion available in cash and cash equivalents. It is profitable and is generating cash as well after completing its reorganization, which has cut $1 billion off its annual run rate. In response to questions about M&A strategy on the call, Chambers said that the acquisition strategy remains the same, buying companies with about 100 engineers and products close to coming to market that Cisco customers tell the company it should buy. He pointed to the acquisitions of Tandberg and Starent as good examples of deals and said that of all the large players out there making acquisitions only Oracle (s orcl) had a similar success rate as Cisco when it came to integrating deals.

If Cisco is back in the shopping mood, we have a few suggestions for places where it should start. It should go all-in on the cloud, which seems like where Cisco wants to focus anyhow.

Since software-defined networks and OpenFlow are clearly an emerging area in the networking space, Cisco should shell out money for a player in this space. Big Switch would be a good bet, as it is trying to create an ecosystem using open-source controllers and then focusing on building services and applications on top of that platform. The model is different for Cisco, but the focus on enterprise applications and services is one that would benefit Cisco and lead to higher margins.

As clouds are deployed, monitoring and tracking websites and application performance from within the network are important for Cisco and its enterprise clients, which is why New Relic could also be a good pick for the company. New Relic’s SaaS-based software monitors performance and tracks issues back to the data center to help enterprises or website owners pinpoint bottlenecks and problems.

If Cisco wants to go big, my colleague Derrick Harris suggests that NetApp might be a good buy, because it reduces Cisco’s reliance on EMC, a relationship that is rumored to be on the rocks. If it is not NetApp, any storage vendor with a strong virtualization story and promise in the enterprise would help bolster Cisco’s burgeoning server division as well as its storage networking lineup.

Given the array of startups bringing both intelligence and performance improvements to different areas of the network, there are plenty of opportunities for Cisco to pick up new customers, technology and market share by buying a startup or established company. Who do you think Cisco should snap up?