Demand for Speed Drives Web Accelerator Buying Spree - Page 2

For Cisco, the FineGround Networks acquisition is important because it needs to move into new growth markets that will supplement its core switch and router product lines, he said.

To stay on a growth path, "Cisco needs to provide a higher level of functionality in the network," Christy said. Network security and voice over IP have turned into high growth markets for Cisco, he said. Now the company wants to turn Web performance optimization into another new growth market, he said.

The Citrix acquisition of NetScaler "makes sense" because it allows it to move deeper into the application-access and performance technology sector, "where they already have a tremendous amount of market strength with older technology," he said.

/zimages/1/28571.gifClick here to read how Cisco and Juniper Networks are continuing to make strategic acquisitions to augment their core router product lines.

Citrix will be able to leverage its strong channel partnerships to grow sales of the NetScaler technology much faster than what NetScaler could have done on its own, according to Christy.

However, Christy also suggested that more fundamental market changes are why independent startup technology companies are more willing to be bought out rather than to seek a big payoff from an initial public stock offering, which was typical just six years ago.

Once they go public, technology startups are facing greater scrutiny and greater expense as they seek to comply with the Sarbanes-Oxley Acts financial accountability regulations.

"The overhead of being a public company has changed pretty dramatically," he said. "Its no longer quite as attractive as it had been," and this makes being acquired by a larger company a more attractive proposition, Christy said.

This wave of acquisitions means there arent that many surviving companies left in the Web application acceleration market, said Robert Whitely, an analyst with Forrester Research Inc., of Cambridge, Mass. Besides F5 Networks, the most noteworthy survivors are Radware Ltd., of Mahwah, N.J., and Coyote Point Systems, of San Jose, Calif.

F5 Networks and Radware, as public companies, are big enough and likely have sufficient revenue and products to sustain themselves as independent concerns, Whitely said. But the recent acquisitions have drawn a lot of attention and may generate additional investment in this sector, he said.

Bill Kish, the founder and CEO of Coyote Point Systems, said that the recent acquisition spree hasnt shaken his companys determination to remain an independent company.

"We are not venture-backed. We have been profitable for seven out of our eight years in business," Kish said. Its not Coyote Points goal to drive steadily toward an initial public offering or a buyout. It plans to continue to "build the company as a product-oriented organization, because that is the path we are taking and that we feel we will be most successful with," Kish said.

However, Kish said he still believes that the recent series of buyouts means that the sector has matured to the point where it wont support a new generation of startups.

"I think that there are still opportunities to do interesting things that nobody has thought of, and I hope that new companies will continue to pop up" to bring their ideas to the market, he said.

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John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...