Looks like Cisco's move into the world of radio/wireless is a go. The company announced yesterday that they have been given regulatory clearance and have now satisfied the regulatory approval requirements under the merger agreement to complete the acquisition of Starent Networks.
The have paid $2.9 billion, for Starent Networks, which makes products that help wireless telecommunications companies ship large volumes of data to phones and computing devices.
The deal represents about a 20 percent premium over Starent’s closing price on Monday 12th Oct of $29.03 a share. After the announcement, Starent’s shares rose $4.88, or almost 17 percent, to close at $33.91 on the following day.
Starent counts carriers like Verizon Wireless, Sprint Nextel, Vodafone Group and China Telecom as customers.
The company’s recent deals reflect that optimism about the growing importance of video traffic to mobile networks. In October, Cisco began a tender offer to buy Tandberg, a Norwegian maker of videoconferencing systems, for $3 billion. And in March, Cisco agreed to pay $590 million for Pure Digital Technologies, a start-up that developed the popular Flip video cameras. The purchase of Pure Digital bolsters Cisco’s video and nascent consumer electronics efforts while also giving the company a way to promote devices that create bulky files that consume great deals of bandwidth.
While the Starent purchase has a video element, it is primarily a sign that Cisco expects smartphones and wireless data plans to rise in popularity. In addition, the acquisition offers another door through which Cisco can approach telecommunications companies that have turned to Ericsson, Alcatel-Lucent and Huawei Technologies for networking equipment that feeds mobile devices.
In a research report, Mark Sue, a networking analyst with RBC Capital Markets, valued the mobile carrier infrastructure market at $47.5 billion.
Starent, was founded in 2000 and has traded publicly since 2007. Last year, the company reported a 74 percent rise in revenue, to $254.1 million. Starent Networks is a leading provider of infrastructure solutions that enable mobile operators to deliver multimedia services to their subscribers. Their solutions combine significant computer power, memory, and traffic handling capabilities with highly distributed software architecture designed to provide high availability, flexibility, and performance built on the power of a Linux operating system.
They have created solutions that provide several core network functions and services, including access from a wide range of radio networks to the operator's IP, or packet core network, mobility management of subscriber sessions, and call control. Their access-independent solution integrates multiple network functions needed for the delivery of advanced multimedia services, such as video, Internet access, voice-over-IP, e-mail, mobile TV, photo sharing, and gaming.
They have developed multimedia core platforms and proprietary software specifically to address the needs of packet-based mobile networks. These products are designed to provide mobile operators with new revenue opportunities while also reducing their costs and they possess a high degree of system intelligence, which allows a mobile operator to understand the details of each subscriber session, enabling individual subscriber management and network traffic flow control.
Their products also enable mobile operators to continue to evolve their core networks to the Long Term Evolution (LTE) Evolved Packet Core (EPC) specification to provide multi-megabit bandwidth, latency reduction, and improved mobility to their subscribers.
Other product areas include CDMA, HSPA, WiMAX, WiFi and Femtocell which make for an interesting complement to Cisco's existing portfolio.