Cisco’s Big Starent Buy Puts LTE in Spotlight

Cisco today announced it intention to acquire carrier wireless vendor Starent for $2.9 Billion.

According to both Cisco and at least one of its primary competitors, the move will change the competitive landscape. From Cisco’s viewpoint, by acquiring Starent, they are now filling in some gaps in their wireless portfolio and will be better positioned to provide a more complete solution to wireless carriers. With the continued growth of mobile data usage on carrier networks, the timing and the stakes have never been higher.

“The acquisition of Starent underscores the importance of the strategic relationships that exist between Cisco and service providers, demonstrating Cisco’s desire to address the market today and as we plan jointly for the future,” Cisco’s chief strategy officer, Ned Hooper, said during a conference call with analysts today.

Hooper commented that in Cisco’s view the mobile infrastructure market is still young and growing. One proof point of that growth comes from Starent’s revenues to date. Hooper said that Starent reported annual revenue of $94 million in 2006 which grew to $254 million in 2008.

Starent Networks president and CEO Ashraf Dahod said on the call that the combined entity will be able to offer a complete solution that will include all the backhaul parts including switches and the routers.

“So the operator could build a complete core network using a full suite of Cisco products,” Dahod said. “That will be a significant advantage to the operator by allowing the network to become more optimal and having embedded intelligence allowing the monetization which is key to the carriers as the traffic moves from voice to data to video.”

When it comes to technology, the key for the combined entity will be LTE which is the next generation wireless broadband technology.

“The future is LTE, ” Dahod said. “The competition is intense and competition will come from players like Ericsson, Nokia-Siemens, Huawei, and as you know Alcatel-Lucent is developing their own LTE product.”

Competitors a plenty

Ericsson is currently in the process of expanding its own LTE portfolio with the pending acquisition of Nortel Networks’ wireless assets for $1.13 billion. Nokia-Siemens has been busy too, expanding its carrier offering with a joint partnership with Cisco rival Juniper networks.

Alcatel-Lucent is also very active in the space, though Lindsay Newell, vice president of marketing for Alcatel-Lucent’s IP activities, claimed not to be too worried about Cisco and Starent.

“We have competed with both Cisco and Starent in the mobile packet core, so this acquisition reduces the field by one vendor,” Newell told InternetNews.com.

“But it only affects one segment of the wireless market, the packet core. We’ll compete at the box level and innovate to remain best of breed in that segment, but also differentiate ourselves with an end-to-end, solutions-centric approach incorporating things like policy management spanning wireline and wireless for multiscreen services, management integration across LTE packet core and RAN (Radio Access Network) and transformation planning, design, integration services.”

For Cisco, the Starent acquisition is the second major deal they’ve done this month. On October 1st Cisco announced a $3 billion acquisition of networking video vendor Tandbeg. During the analyst call, Hooper noted that Cisco isn’t done buying up companies yet.

“We will continue to be aggressive driving acquisitions,” Hooper said.