Cisco Systems Inc, the world's largest maker of computer-networking equipment, yesterday said that it is acquiring privately-held cloud networking start-up Meraki Inc for $1.2 billion in cash in order to expand its cloud computing business in new markets.

The acquisition comes barely a week after Cisco paid 125 million to buy Cloupia, a developer of software that helps data centre operators manage their resources.

Under the terms of the deal, San Jose, California-based Cisco will pay approximately $1.2 billion in cash and retention-based incentives to acquire the entire business and operations of Meraki. Cisco expects the acquisition to close in the second quarter of its fiscal year 2013.

Founded in 2006 by members of MIT's Laboratory for Computer Science, Meraki is funded by private equity firm Sequoia Capital and Internet giant Google.

Meraki technology offers customers Wi-Fi, switching, security and mobile device management centrally managed from the cloud. Meraki solutions support BYOD, guest networking, application control, WAN optimisation, application firewall and other advanced networking services.

Based in San Francisco and with offices in New York, London and Mexico, Meraki combines a high-velocity software development methodology with a tightly linked inside sales and channel model that will form Cisco's new Cloud Networking Group.

Cisco said that Meraki's cloud networking solutions will expand its network offerings by providing scalable solutions for midmarket businesses. The acquisition will also strengthen its unified access platform, which makes IT more responsive to business innovation by simplifying IT operations and uniting wired and wireless networks, policy and management into one integrated network infrastructure, unlike other competitive offerings.

Eying the booming market for smartphones and tablets, the acquisition will help Cisco expand its customer base since Meraki's technology helps more than 10,000 customers worldwide manage their security and wireless access points via the Internet.

''The acquisition of Meraki enables Cisco to make simple, secure, cloud managed networks available to our global customer base of mid-sized businesses and enterprises. These companies have the same IT needs as larger organisations, but without the resources to integrate complex IT solutions,'' said Rob Soderbery, senior vice president, Cisco Enterprise Networking Group.

Sanjit Biswas, CEO of Meraki said that when Cisco approached it with offer a few weeks ago, its initial reaction was to politely say "thanks, as it was planning to take Meraki public.

''After several weeks of consideration, we decided late last week that joining Cisco was the right path for Meraki, and will help us achieve our goal of having maximum impact. As founders, all three of us plan to stay on as leaders of the business unit and look forward to continue towards our goal of $1 billion in annual revenue,'' he said.