Cisco buys Starent, boosting 4G strategy and outsmarting Juniper
Published: 14 October, 2009
READ MORE: Starent Networks | Cisco Systems | Juniper Networks | Core Network | LTE
Only a few weeks ago at the 4G World event in Chicago, Cisco was dismissing core networking specialist Starent as an unproven player "we hardly even notice". Apparently the IP giant's attention has sharpened in the meantime, since it has now paid a respectable $2.9bn to acquire the firm, solidifying an already powerful position in the mobile IP core. Starent should bring Cisco a strengthened presence in the US carriers and LTE, having gained a high profile deal for Verizon Wireless' 4G core, and the deal may also have been motivated by the need to outsmart Juniper, itself rumored to be adding Starent to Nokia Siemens in its anti-Cisco alliance.
Starent was a key pioneer of the idea that operators should buy best of breed core networking equipment, rather than sourcing the RAN and core from the same vendors. As data usage has exploded on wireless networks, the core is becoming increasingly intelligent, in order to handle greater capacity and, more importantly, support the kind of traffic and subscriber management functions that enable carriers to monetize their internet traffic. Cisco has been a key player in this market as the operators move to IP, and is positioning itself as the vendor that can help carriers cope with the coming 'exabyte era' of massive multimedia traffic. But its position is constantly under siege from the telcos' incumbent suppliers and from Juniper, plus emerging 4G-focused start-ups like WiChorus.
Starent will strengthen its hand and fill in more gaps in one of the networking leader's key strategies, mobile video (it recently also spent $3bn on videoconferencing firm Tandberg, and has predicted that, by 2013, 60% of data on mobile networks will be video content). Cisco will pay $35 per share in cash for Starent and assume outstanding equity awards, and the deal is expected to close during the first half of 2010. At that point, Starent will be rechristened as the new Mobile Internet Technology Group, led by Starent president and CEO Ashraf Dahod.
As well as the positives of the agreement, Cisco may also have been pushed into action by Juniper. UBS analyst Nikos Theodosopoulos says Juniper was poised to announce its own partnership with Starent at its analyst day in late October, and is now left searching around for a wireless strategy and a way to take a share of the emerging market for helping carriers migrate to 4G. A Starent deal would have been a strong complement to Juniper's joint venture, announced in June, with Nokia Siemens, focused on IP Ethernet backhaul. Cisco grudgingly conceded that this JV was "worth watching", and will be keen to prevent Juniper encroaching further on the territories it sees as its own by right.
Starent's current key product is the ST40 gateway range for CDMA and HSPA, and it is moving quickly into hot new areas such as LTE and femtocells. A recent research note by Deutsche Bank estimated that the firm, which reported sales of $254m for 2008, had potential orders of $2.5bn up to 2011.
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