Cisco today announced it intends to purchase Internet of things (IoT) startup Jasper Technologies for $1.4 billion in cash. It will also pay some retention-based incentives and “equity awards" to keep employees, according to its announcement.

Jasper officials said the company has more than 3,500 enterprise and 27 service provider customers connecting devices through its cloud platform. The connected devices range from cars to jet engines and implanted pacemakers – mostly over mobile networks. Jasper’s software-as-a-service (SaaS) platform can be used to launch a variety of IoT services for connected devices, ranging from management and analytics to remote diagnostics and monitoring.

Jasper was founded in 2004, and its customers include such names as Tesla Motors, Starbucks, and Microsoft. It has long been one of the hotter startups in Silicon Valley and had been anointed "unicorn" status – reaching a billion-dollar valuation – several years ago. The Wall Street Journal recently estimated that Jasper was valued at $1.4 billion after an investment round in April 2014. The company has received private investment of more than $200 million.

Why is Jasper selling for $1.4 billion when it was valued at that level in 2014? It's clear that valuations have deflated for many hot startups in the past year, and with the stock market sinking, it's likely that Jasper's board was happy to have a large cash offer from a company such as Cisco.

On a conference call with analysts and press, Cisco officials and Jasper founder and CEO Jahangir Mohammed touted the benefits of the acquisition.

Rowan Trollope, SVP and GM of Collaboration with Cisco, said that there was virtually "no overlap" with Cisco's IoT portfolio, which has been focused so far on connectivity and edge devices.

Cisco officials pointed to the allure of Jasper's SaaS model.

"Jasper has a predictable, recurring-revenue business model, complementing where Cisco has been heading as a company," said Rob Salvagno, Cisco's VP of corporate development.

Cisco officials declined to give revenue numbers for Jasper.

Jasper's SaaS cloud platform, which involves no hardware, could complement Cisco's equipment partnerships with service providers and enterprise companies. Jasper has built the business by working with service providers and large manufacturers, such as car companies, to roll out IoT services.

“Cisco needs to diversify away from hardware into a cloud software model – buying Jasper is a way to do that,” says Scott Raynovich, SDxCentral’s VP of research. “It looks like an expensive deal, but Cisco has plenty of cash, so this is a smart strategic move.”

Cisco plans to build upon Jasper's platform, adding IoT services such as enterprise Wi-Fi, security for connected devices, and analytics.

Jasper CEO Mohammed will run the new IoT software business unit under Cisco SVP Rowan Trollope.

Back in 2014, Mohammed predicted to CNET that Jasper would “likely become the first IoT company that's public.”

That didn’t happen. But getting bought by Cisco for $1.4 billion isn’t so bad. The acquisition of privately held Jasper, based in Santa Clara, Calif., is expected to close in the third quarter of fiscal year 2016.