Cisco to Acquire Starent for $2.9B as Buying Spree Continues

Cisco Systems is continuing its aggressive acquisition strategy, this time grabbing mobile infrastructure vendor Starent Networks for $2.9 billion.

The cash deal continues a busy year in acquisitions for Cisco, whose purchases in 2009 also include Flip video camera vendor Pure Digital in May for about $590 million and Norwegian video conferencing company Tandberg for $3 billion, a deal announced Oct. 1.

And according to Ned Hooper, chief strategy officer and senior vice president of Cisco’s consumer business, the deal for Starent, announced Oct. 13, won’t be the last.

“We will continue to be aggressive driving acquisitions,” Hooper said during a conference call with investors, analysts and journalists, adding that internal development and partnerships also are key avenues as Cisco looks to expand its reach.

With Starent, Cisco is looking to grow its presence in the rapidly growing mobile Internet space. Starent’s products are designed for wireless service providers, such as AT&T and Verizon, looking to provide a wider range of mobile Internet experience. The mobile Internet is becoming a key focus for companies like Cisco, Nokia and Alcatel-Lucent as the number of smartphones and other Internet-connected mobile devices—such as netbooks—in use by businesses and consumers is exploding.

According to Cisco’s Visual Networking Index, global mobile data traffic will more than double every year through at least 2013.

During the call, Ashraf Dahod, president and CEO of Starent, said the combination of his company and Cisco will mean that Cisco will be able to “offer a complete [mobile Internet] solution, except for the radio.”

Starent’s technology provides multimedia intelligence, core network functions and services that service providers can use to manage access from any 2.5G, 3G or 4G radio network to a mobile operator’s packet core network. Once the deal is closed—which is expected to happen in the first half of 2010—Starent will become Cisco’s new Mobile Internet Technology Group. Dahod will run that group, which will be housed within Cisco’s Service Provider Business, according to Pankaj Patel, senior vice president and general manager of the Service Provider Business.

Yankee Group analyst Zeus Kerravala said though pricey, the acquisition will be worth it for Cisco.

"Providing both wired and wireless has been the go-to-market [strategy] for vendors like Alcatel-Lucent, Ericsson, Huawei and Nokia Siemens," Kerravala said in a note about the deal. "Until now, Cisco has tried to talk the talk. but didn't have the actual portfolio to back it up. Now they do."

The odd man out seems to be Juniper Networks, Kerravala said. They were rumored to be in the hunt for Starent. Now that that company's off the market, Juniper still has no wireless assets to speak of, and few other acquisition possibilities out there in the market.

Starent, headquartered in Tewksbury, Mass., was launched in 2000 and currently has about 1,000 employees. In 2006, revenues were about $94 million, but grew to $254.1 million in 2008, up 74 percent over 2007 figures.

Starent products are deployed at more than 100 customer sites around the world, Hooper said.