Cisco to acquire femtocell company?

Cisco to acquire femtocell company?

Cisco may be looking to acquire a femtocell company that won a major RFP at AT&T

Cisco may be looking to acquire a femtocell company that won a major RFP at AT&T, analysts at a Wall Street investment firm are speculating.

Ip.access, a maker of femtocell wireless cellular-access-points, may have won a US$500 million, 7-million-unit contract with AT&T, besting bids from Motorola, Alcatel-Lucent, Nokia-Siemens, Airvana, and 2Wire, among others, according to a bulletin from San Francisco-based ThinkPanmure.

ThinkPanmure believes this has aroused Cisco enough to make ip.access a strategic-acquisition target on par with its previous purchases of broadband and wireless companies Linksys, Scientific-Atlanta and Navini.

"We believe Cisco is looking to increase its profile in wireless, and that ip.access is likely next in this strategy as Cisco's femtocell play," write ThinkPanmure analysts Anton Wahlman and Eric Kainer in the bulletin, released today. "We believe that if this were to happen, it would be integrated into the Linksys organization."

Femtocells are cellular access points for home and businesses -- essentially tiny cell towers -- that route nearby wireless voice traffic through preexisting broadband connections to save money and boost call quality. Two drawbacks to femtocell adoption, however, have been price and transmission quality.

The five-year AT&T contract calls for ip.access eventually to price the units at less than US$100 apiece. At 7 million units, however, the total value of the contract could exceed US$500 million, ThinkPanmure states. "We believe that AT&T was willing to sign onto such a high-volume, long-term contract only if the penalty clauses are very stringent," the analysts state. "They would likely include a standards-based effort and many escape clauses if ip.access does not deliver on the difficult technology milestones."

Even then, there are some caveats, ThinkPanmure notes. "One could argue that AT&T's downside is limited, given the tight

contract and record-low prices," the firm states. "However, we believe that the femtocell technology, as such, remains unattractive compared to dual-mode GSM/Wi-Fi phones currently using the well-proven, standards-based [Unlicensed Mobile Access (UMA)] protocol.

"In our opinion, if AT&T were smart and rational, it would immediately copy T-Mobile USA's approach to the market with Wi-Fi/UMA, and then add femtocells some time later, if consumers are willing to pay for them at that time. In the meantime, the Wi-Fi/UMA approach is essentially zero-cost (free) to implement, and its back-end architecture can be extended to the femtocell access points, too."

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