Cisco's $475m Intucell buy marks another step in its long history of Israel acquisitions

The world’s largest maker of networking equipment has bought its tenth Israeli start-up after 15 years of investing in the country.
Written by David Shamah, Contributor

Meet yet another American multinational that has become a serial acquirer of Israeli start-ups – networking giant Cisco, which this week plunked down $475m to purchase Israel's Intucell, maker of self-organising network (SON) software for mobile networks. The company's 85 workers will become part of Cisco's Service Provider Mobility Group, and will join 2,000 other staff in Israeli units of Cisco, who work in the company's two development centres and at digital media software company NDS in Jerusalem.

With its latest acquisition, Cisco will have acquired ten Israeli companies in the past dozen years. And according to Yoav Samet, a Cisco director responsible for many of the company's acquisitions, Cisco is actively on the prowl for more Israeli companies. In an interview with he Israeli business daily Calcalist, Samet said that the company was seeking acquisitions and investments in Israeli companies operating in the areas of data security, datacentres, virtualisation, and cellular communications.

And that's exactly what Cisco got when it purchased Intucell. The company's software lets mobile towers communicate with each other and respond to cell use overload issues by automatically adjusting network resources to cover imbalances. For example, when Intucell's SON detects too many users on a single cell tower, the system automatically adjusts the coverage by looping in assistance from nearby towers. It's a solution to a nagging problem that will allow Cisco to supply carriers with a software solution to overloaded cell networks, instead of just selling them increasingly commoditised hardware.

Cisco corporate business development head, Hilton Romanski, wrote in a blog post on Wednesday that the Intucell acquisition "will allow Cisco to extend network intelligence and tightly align different software elements across our product portfolio. It also reinforces our commitment to service provider customers and strengthens our expertise in mobility. In addition, the acquisition of Intucell furthers our long-standing commitment to cutting-edge innovation based in Israel".

Cisco's history in Israel

Cisco and Israel go way back, with the company's first local acquisition taking place in 1998. Nearly all of Cisco's direct employees in Israel are engineers (NDS operates as a separate unit), and the Cisco's Netanya R&D centre is the company's second largest in the world. Israeli companies have furnished the technology used in Cisco's keyproducts, such as the network management systems designed by Israel's Sheer Networks. Cisco acquired Sheer in 2005 for $122m, and with the Intucell acquisition, Cisco has spent $1.5bn on Israeli start-ups over the last 15 years.

In fact, according to Tal Slobodkin, responsible for the company's acquisitions and investments in Israel, Cisco has so far invested in 20 Israeli start-ups (besides the acquisitions). "There is no other country where Cisco does so many deals," he told Calcalist.

Cisco CEO John Chambers visited Israel in June last year, and discussed the role Cisco's Israel operations play in the company. Speaking at a conference during his visit, Chambes said: "Cisco sees itself as a strategic partner of the State of Israel and is proud of this cooperation," and that the company "attaches great importance to the quality of Israel’s human capital and would be happy to increase cooperation at the strategic level".

John Chambers speaks at the Presidential Conference in Israel last June (Photo credit: Govt. Press Office)

Cisco's work in Israel isn't limited to tech, either. On his visit, Chambers announced a plan to provide training – and jobs – for Arab high-tech workers through the Maantech program. The program, in which Cisco is a major participant in, provides tech graduates looking for jobs with seminars and labs on topics such as how to be prepared for a job interview, simulations, group dynamics, a review of the high tech industry, to better prepare them for the Israeli high-tech job market.

According to Chambers, Cisco has been investing in start-ups in the Palestinian Authority, mostly in Ramallah: "With just a little help from high-tech companies, the Palestinian Authority was able to boost its gross domestic product significantly." Ans Maantech would do the same for Arabs in Israel, he said. "Imagine how [with Maantech] we could help the GDP of Israel and Israeli Arabs if we could get 12,000 people hired".

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