3 Ways Cisco Systems, Inc. Is Expanding Into the Internet of Things

By Markets Fool.com

Cisco , one of the largest networking hardware companies in the world, generates nearly $50 billion in annual revenue by connecting devices to the Internet and each other. It controls around 63% of the router and switches market and 30% of the network security market, according to IDC and Synergy Research Group.

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That makes Cisco one of the top players in the Internet of Things (IoT) market, which consists of embedded chips connecting everything from wearables to cars to industrial equipment. Cisco expects the number of connected devices worldwideto double from 25 billion in 2015 to 50 billion by 2020.

Connecting everything, even teddy bears. Source: Cisco

To address growing IoT demands, Cisco offers Unified Computing Systems (UCS) solutions, which combine servers, networking hardware, and security software into a single package. These bundles help Cisco sell hardware and services, which respectively accounted for 76% and 24% of its top line last quarter, at lower prices than smaller rivals can offer.

But beyond those bundles, Cisco is making some big moves in the IoT space. Let's take a look at three interesting plays investors should be aware of.

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1. $2 billion in investments
Cisco has invested $1 billion in IoT products and solutions and will invest another $1 billion into the industry by 2017, according to Irving Tan, President of Asia Pacific and Japan. Those investments are aimed at acquiring or investing in promising IoT companies and upgrading its technological capabilities.

Speaking at a press conference, Derek Idemoto, corporate development VP, stated that the company was investing in 80 active director portfolio companies and over 35 funds related to IoT technologies. Idemoto stated that these investments are categorized into "themes" -- including data analytics, content technology ecosystems, and connected mobility solutions.

2. Startup accelerators and innovation centers
Some of that money is being used to establish start-up accelerators and innovation centers to assist developers and smaller companies worldwide. Cisco has opened eight Internet of Everything Innovation Centers in Rio de Janeiro, Toronto, Berlin, Barcelona, Songdo, Tokyo, London, and Sydney. These centers provide a space where customers, start-ups, and researchers can discuss and test IoT technologies.

For the EMEA (Europe, Middle East, and Africa) region, Cisco, Intel, and Deutsche Telekom announced the establishment of the Challenge Up! IoT accelerator in Krakow, Berlin, and Vienna. The accelerator will help start-ups get their products to the market faster through joint projects, mentoring, networking, and the use of the three companies' corporate assets. Selected companies will be eligible for strategic investments and commercialization assistance.

These innovation centers and accelerators can help Cisco invest early in promising IoT technologies and tether them to its networking ecosystem.

3. Analyzing real-time data
Over the next decade, Cisco expects the value of the IoT industry to hit $19 trillion, with $7.3 trillion generated by data analytics solutions. However, Cisco lags behind IBM and Oraclein that market, since most analytics solutions analyze data after it has been transferred across the network to a server. This means that collected data focuses on past events instead of real-time applications.

To address that issue, Cisco launched its "Connected Analytics for the Internet of Everything" initiative last December, which integrates analytics capabilities into its networking hardware. This allows companies to process data in real-time from IoT devices, making it a disruptive threat to older analytics solutions.

To showcase this technology, Cisco placed a "Connected Billboard" on Highway 101 in the San Francisco Bay Area. The billboard displayed a message which responded to real-time traffic reports from the Internet, and it delivered either shorter or longer messages to drivers depending on how fast they were driving. This technology could eventually be used during concerts, sporting events, or other live events.

The Connected Billboard. Source: Cisco

It also complements Cisco's "smart cities" partnershipwith IBM, which focuses on improving city infrastructure with IoT technologies.

The connected future
A huge land grab is happening in the IoT space, as tech titans like Microsoft, Qualcomm, Intel, and IBM all leverage their established strengths to claim a piece of the pie.

For Cisco, the networking foundations are already in place. But now it has to evolve that technology to connect to "everything" with embedded sensors. Investing in more companies, sponsoring accelerators, and enhancing its networking hardware with analytics tools represent three promising paths toward that goal.

The article 3 Ways Cisco Systems, Inc. Is Expanding Into the Internet of Things originally appeared on Fool.com.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Intel. The Motley Fool owns shares of International Business Machines and Oracle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.