Cisco Systems is buying Starent Networks for £1.86 billion.
The purchase will enable Cisco to send IP content wirelessly via carrier networks, while, with its recent $3 billion purchase of video conference vendor Tandberg, consumers and professionals will be able to share IP video conferences.
The company has been laying out a map for years to move beyond its traditional switching and routing base. Before its acquisition of Starent, Tandberg and Pure Digital, it invested heavily in WebEx for Internet collaboration and expensive telepresence systems and placed extensive wireless systems and scores of high definition displays in professional ballparks.
A Cisco blog put emphasis on the value of buying Starent, which it regards as a "mobile Internet leader."
"The next step in the evolution of the Internet is to make it available anywhere and at any time, which requires the convergence of the mobile world and Internet," says the blog by Simon Aspinall, Cisco's senior director of service provider marketing. Cisco is banking on two-thirds of the mobile Internet traffic coming from video content in 2013, he adds.
"The mobile Internet is a huge transition that is happening very quickly," he added.
LTE, with much higher bandwidth than current networks, will be an especially good pipe for that video content. As such, Yankee Group analyst Zeus Kerravala noted that while Starent makes carrier equipment for a range of wireless protocols, including high-speed WiMax technology, it also makes gear for LTE, the leading competitor to WiMax.
Kerravala said Cisco's interest in Starent is primarily the LTE component, which gives Cisco the ability to broaden its product mix, much as competitors Nokia, Alcatel-Lucent and Huawei Technologies have done.
Juniper Networks was rumored to be interested in buying Starent, and Cisco's move today will hurt Juniper as it attempts to include more wireless products for carriers, Kerravala predicted.
Peter Christy, an analyst at Internet Research Group, said Cisco's recent multibillion-dollar purchases stem partly from the company's having $30 billion in available cash and wanting to sell more into the service provider marketplace to compete with Juniper.
Buying Starent, which has sold into service provider markets, could bring Cisco a "multiplier effect" of Starent's sales, since Cisco has become adept at selling products it obtained from previous acquisitions to its huge customer base.
Cisco needs to move beyond its traditional networking business, Christy said. With its recent activity, Cisco seems to be headed toward buying companies that work well in furthering human collaboration and video, Christy said.
Cisco CEO John Chambers "believes in video, and points to how the early use of the Internet in business systems resulted in faster economic growth in regions where it was used," Christy said. "Now that that phenomenon has slowed down, he's interested in networking that facilitates human collaboration."