Cisco has agreed to buy IP-based mobile infrastructure products provider Starent Networks for $2.9 billion, in a move to expand its mobile internet offerings for service providers.
Under the terms of the agreement, Cisco will pay $35 per share in cash in exchange for each share of Starent Networks and assume outstanding equity awards. The acquisition has been approved by the boards of directors of both companies.
The deal follows Cisco’s $3 billion acquisition of video conferencing firm Tandberg earlier this month, in a bid to strengthen its position in the video communications market.
Pankaj Patel, senior vice president/general manager of service provider business at Cisco, said: Cisco and Starent Networks share a common vision and bring complementary technologies designed to accelerate the transition to the mobile internet, where the network is the platform for service providers to launch, deliver and monetise the next generation of mobile multimedia applications and services.
Founded in 2000, Starent Networks makes network equipment that manages access from any 2.5G, 3G and 4G radio networks to a mobile operator’s packet core network. Its access-independent technology is deployed in CDMA2000 (1X, EV-DO), UMTS/HSPA and WiMax networks. For the year ended December 31, 2008, it reported revenue of $254.1m, up 74% from the prior year.
Prior to the close, Cisco and Starent Networks will continue to operate as separate companies. Upon completion of the transaction, Starent Networks will become the new Mobile Internet Technology Group led by Starent Networks’ president and chief executive officer Ashraf Dahod, within Cisco’s service provider business which is led by Pankaj Patel.
Ashraf Dahod said: Combining Cisco’s strength in Video and IP with Starent Networks’ leading mobile infrastructure solutions, creates a compelling portfolio of products that provides an integrated architecture to offer rich, quality multimedia experiences to mobile subscribers on 3G and 4G networks.
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The acquisition is expected to close during the first half of calendar year 2010. However, the close date is subject to customary closing conditions and regulatory reviews. Cisco expects the acquisition to be dilutive to non-GAAP earnings in fiscal years 2010 and 2011 and accretive to non-GAAP earnings in fiscal year 2012.
