Cisco Takes $3 Billion Stab at Smartphones

Big purchase is second in 2 weeks

The cost? $35 per share. The payoff? A grip on the growing smartphone market, hopefully.

Those are the factors behind Cisco System's latest business move in buying Starent Networks Corp.

Betting on the growing popularity of data-hungry phones like the iPhone, San Jose, Calif.-based Cisco said Tuesday it had agreed to pay $2.9 billion for Starent Networks Corp., a maker of equipment for wireless carriers. Starent will become Cisco's new Mobile Internet Technology Group, headed by Starent CEO Ashraf Dahod.

It is the second major acquisition in two weeks for Cisco, the world's largest maker of computer-networking gear. On Oct 1., it announced a deal to buy Tandberg ASA, a leading maker of videoconferencing gear, for $3 billion. Cisco is coming out of the recession with the largest cash balance of any technology company, at $35 billion at the end of July.

The move is also a bright spot for the economy, as it shows there is a lot of money moving in the market. Similar to the housing market, business are going cheap these days.

Starent, of Tewksbury, Mass., makes equipment that gives carriers a way to tie their wireless networks to the Internet, delivering much-demanded services like video, games and mobile TV right on your handheld device.

"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," Dahod said.

It should be no surprise that Cisco's gain might just be a loss for competitors. Rival Juniper Networks will feel it in the gut, as Avian Securities research chief Avi Cohen points out.
The deal is expected to close early in 2010.

The Associated Press contributed to this report.

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