Cisco goes shopping (again) scoops up Starent

Updated: Cisco said it will buy Starent Networks in a deal valued at $2.9 billion.
Written by Larry Dignan, Contributor

Updated: Cisco said it will buy Starent Networks in a deal valued at $2.9 billion. The move comes shortly after Cisco bought Tandberg.

Starent provides mobile Internet Protocol (IP) gear. Cisco will use Starent's equipment to better target carriers, which are increasingly relying on wireless units to fuel their growth.

According to a statement, Cisco's purchase will work out to be $35 a share in cash for each share of Starent. The deal is expected to close in the first half of 2010. The Starent acquisitions comes just two weeks after Cisco announced plans to buy Tandberg.

Cisco said it plans to use its video and IP expertise and combine it with Starent's equipment to better target 3G and 4G wireless buildouts. On the 4G front, Starent's equipment has been mostly used for WiMax buildouts.

Starent's equipment allows carriers to manage mobile networks and services. Once the deal is completed, Starent CEO Ashraf Dahod will report to Pankaj Patel, who runs Cisco's service provider business. Starent, which was founded in 2000 and went public in 2007, has roughly 1,000 employees worldwide.

Among the initial analyst reaction:

JMP Securities analyst Samuel Wilson:

Starent Networks produces infrastructure hardware, software, and services that enable mobile operators to deliver video, Internet access, voice-over-IP, and e-mail services to their subscribers. Starent is the market leader in North America but competes with Ericcson, Nokia-Siemens, Alcatel-Lucent, Huawei, and ZTE. Starent's strength has been with CDMA networks, and 75% of Starent’s revenue comes from Verizon; it was recently named a secondary supplier on Verizon’s LTE rollout. AT&T is currently making its 4G (LTE) plans and, in a blow to Starent, reportedly narrowed the field to Nokia- Siemens, Ericsson, and Cisco. It is possible that Cisco saw Starent’s technology as a key toolset to help seal the AT&T deal.

Cowen analyst John Marchetti:

We view the deal favorably, as we think the addition of Starent’s multimedia intelligence, core network functions, and services to manage access from any 2.5G, 3G and 4G radio network to mobile operators packet core network enhances Cisco's competitive position in wireless infrastructure market.

Deutsche Bank analyst Brian Modoff:

Our checks indicate that Cisco was also motivated by Starent's engineering talent which has software expertise that Cisco can leverage across other product offerings. We expect Cisco to launch a variety of service blade offerings on its routing platforms (e.g. IMS, policy, femtos, ad-supported services, etc.) that mainstream Cisco's platforms into the operators' services-aware networks.

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