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Cisco Shifts Into WiMAX With Navini Buy

UPDATED: In a deal that completes its reversal on WiMax and places it squarely in the wireless metropolitan network market, Cisco announced plans to purchase Navini Networks, a manufacturer of mobile WiMAX wireless networking equipment.

Under the terms of yesterday's agreement, Cisco will pay $330 million in cash and assumed stock options for the company. The acquisition is scheduled to close by the end of January.

Once finalized, the deal will complete the networking giant's sea change in its thinking on WiMAX, placing Cisco squarely into the wireless metropolitan network market and potentially pushing it into competition with 3G wireless network providers.

In 2004, the company issued a position paper stating that it would not manufacture WiMAX equipment, but partner with radio access network (RAN) providers. However, the company's position has evolved as WiMAX has taken off, particularly in developing markets.

"It's Cisco getting into a new space," said Peter Jarich, research director and principal wireless infrastructure analyst at Current Analysis. "Obviously, they're already in the wireless space with Wi-Fi. But this is something they probably couldn't have done with 2G or 3G [wireless networking] because they were wrapped up by incumbent vendors. There are no incumbents yet in WiMAX, so Cisco can get in while the market is young."

While the WiMAX market is crowded with major players -- Motorola and Alcatel-Lucent being the current market leaders, according to Jarich -- Navini has moved to differentiate itself with its own research and development. The company, headquartered in Richardson, Texas, holds 13 patents on WiMAX technology, and has 14 more pending. The key to Navini's differentiation has been the combination of two technologies: "beamforming" and MIMO.

Navini holds 13 patents on WiMAX technology, including "Smart Beamforming," which allows WiMAX base stations to pinpoint the location of users and direct WiMAX transmissions directly at them, increasing the effective range of WiMAX base stations. The company also combines beamforming with another technology, Multiple Input Multiple Output (MIMO), a method to increase bandwidth of WiMAX networks through the use of multiple antennas on both clients and base stations.

The combination makes Navini's products especially suited to fixed or portable WiMAX applications in areas where there's no wire-based broadband available.

The company has already deployed its technology widely to service providers worldwide. Navini has over 75 commercial WiMAX customers, including Australia-based Unwired, Irish Broadband, and Lubbock, Texas-based Xanadoo Wireless High-Speed Internet, an Internet service provider with over 12,000 WiMAX subscribers.

"WiMAX is an IP-centric technology, so it fits very well into our product portfolio," said Cisco spokesperson John Noh. "It fits in with our IPNG (Internet Protocol Next Generation) service provider architecture, and we also see it as a very nice complement to our Wi-FI and Wi-FI mesh architectures."

Beyond rounding out wireless product offerings, the Navini purchase has potentially immediate financial benefits for Cisco, fitting in with its increased focus on emerging markets for growing revenue. The company has given financial guidance that it's experiencing 35 to 40 percent growth in emerging markets.

"We see WiMAX as a way to potentially reach millions of Internet users we would not otherwise been able to reach," Noh said. "We see it as a cost-effective and efficient way to roll out broadband in developing nations. A lot of those countries don't own the copper infrastructure required to roll out broadband otherwise."

Jarich said that approach targets a more likely market than competitors' strategies, which typically envision WiMAX as a mobile technology.

"That's sort of what Sprint is looking at, WiMAX as a 4G mobile broadband, data-on-the-go technology. [But that] market is questionable -- users haven't grabbed onto them yet," he said.

Cisco said it would integrate Navini into the Ethernet and wireless technology group within its wireless networking business unit. Navini's offices in Richardson and Bangalore, India, will be integrated into Cisco offices already in those cities, so the transition is expected to be relatively painless, Noh said.