Cisco buys mobile IP specialist Starent

Second major acquisition for networking giant this month

Cisco Systems has announced its second multibillion dollar deal this month: a definitive agreement to acquire Starent Networks, a provider of IP-based mobile infrastructure for carriers, for US$2.9 billion.

The buyout comes on the heels of Cisco's roughly $3 billion buyout of videoconferencing leader Tandberg, announced on October 1.

Starent makes products that manage access from 2.5G, 3G, and 4G wireless networks to a mobile operator's packet core network. Starent's products are deployed in CDMA2000 (1X, EV-DO), UMTS/HSPA, LTE, wi-fi, and WiMax networks.

Cisco has a significant investment in WiMax, having bought Navini Networks in 2007 for $330 million, and winning a supply contract with Clearwire earlier this year.

Lately, however, Cisco's been making overtures to address the LTE market, widely considered a competitive alternative to WiMax.

Verizon and AT&T have already made public their plans to adopt LTE over mobile WiMax as the 4G technology of choice.

"LTE is definitely the 4G technology of choice," says Laurence Swasey, senior analyst at wireless market research firm Visant Strategies. "The most advanced wireless networks are LTE. This is a great move by Cisco because not many people have deployed mobile WiMax, it hasn’t gotten the play. It’s a good move to make sure they don’t miss the LTE ride."

Cisco claims that its maneuvers are "access agnostic" rather than a hedge on an earlier bet that may not pay off expected dividends. That may be where Starent fits in — its products have been deployed by over 100 mobile operators in 45 countries.

In any event, Cisco says the internet is at "an inflection point" as IP-enabled smartphones and other connected mobile devices gain rapid acceptance. According to Cisco's own research, global mobile data traffic is expected to more than double every year through 2013.

Under terms of the agreement, Cisco will pay $35 per share in cash in exchange for each share of Starent Networks and assume outstanding equity awards for an aggregate purchase price of approximately $2.9 billion. The acquisition has been approved by the boards of directors of both companies.

The acquisition is expected to close during the first half of calendar year 2010.

Prior to the close, Cisco and Starent will continue to operate as separate companies. Upon completion of the transaction, Starent will become the new Mobile Internet Technology Group led by Starent President and CEO Ashraf Dahod. He will report to Pankaj Patel, senior vice president and general manager of Cisco's Service Provider business.

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