15 October 2009
Cisco to buy Starent for $2.9 billion
Cisco Systems Inc., the largest maker of networking equipment, agreed to buy Starent Networks Corp. in a deal valued at $2.9 billion, its second multibillion-dollar acquisition in less than two weeks.
Cisco will pay $35 a share in cash and assume outstanding equity awards, according to a statement this week. The per-share price is 21% more than Starent’s closing price Monday. Cisco, based in San Jose, Calif., expects the transaction to add to earnings by fiscal 2012.
Starent’s equipment helps wireless carriers understand the kind of traffic that’s crossing their networks, enabling speedy routing of that information to mobile devices. The acquisition helps Cisco benefit from the increasing demand for phones such as the iPhone and BlackBerry, which boost data traffic, said Joanna Makris, an analyst at Brigantine Advisors.
“Cisco sees the consumer trend toward the pervasive adoption of mobile devices,” New York-based Makris said. “They want to find a way to drive network traffic and the growth of their infrastructure business.”
Makris recommends holding Cisco shares and buying Starent, and owns neither.
Global data traffic probably will more than double every year through 2013, according to Cisco. Cisco aims to add technologies that boost Internet traffic, increasing demand for its routers and switches. With Starent, Cisco may be able to take a bigger portion of carriers’ budgets as they upgrade their networks to handle growing Internet traffic, Makris said.
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