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Communications, Finance

Cisco Grabs Wireless Startup


Networking equipment market leader Cisco Systems on Tuesday said it plans to acquire wireless spectrum management startup Cognio for an undisclosed sum.

The acquisition of the seven-year-old, Germantown, Maryland-based Cognio steps up the  pressure on Cisco’s smaller rivals in the still-emerging corporate wireless local area network market.

Cognio, a Cisco partner, markets products that detect and manage local-area radio frequency interference that can degrade or completely interrupt network communications. The startup has taken more than $20 million in funding from Northbridge Venture Partners, ABS Ventures, and Avansis Venture.

“The corporate wireless market is finally finding some traction and Cognio decides to sell, so Cisco must have made them a pretty good offer,” said William Lesieur, an analyst with Technology Business Research.

San Jose, California-based Cisco has bought three corporate wireless LAN firms in the past eight years at a cost of almost $1.3 billion.

Cisco acquired Aironet Wireless, which made wireless networking products, for $800 million in stock in 1999. The networking giant also acquired wireless gear maker Airespace for $450 million in 2005, and wireless security software firm Meetinghouse Data Communications for $43.7 million in July 2006.

A heavily-invested but so far disappointing sector, the corporate wireless market is attractive again because of the emergence of a new WiFi standard and the growing demand for voice over WiFi services.

The new 802.11n standard promises more bandwidth, better security, and improved reliability, all issues that have so far slowed WiFi adoption among businesses. But the 802.11n standard, while attractive, is still incomplete after at least two years in development.

“As these wireless networks become more complex and include voice and location based services, they will require lifecycle care and some of these acquisitions are timed to coincide with that kind of demand,” said Chris Silva an analyst with Forrester Research.

The wireless LAN market includes a number of smaller firms such as Aruba Networks, which went public in March, Trapeze Networks, Meru Networks, and Colubris Networks.

“If Cisco sells Cognio’s products as a service it will have significant impact on its competitors and their partners because many depend on that kind of lifecycle management for continuing revenue,” said Mr. Lesieur.

“As hardware products commoditize, service is where you make your money so the competition will have to respond,” he said.

A Cisco spokesman said the company plans to sell Cognio’s software as products initially but will sell them as integrated services ultimately.