What did Cisco buy? A look at its '06 acquisitions

Cisco's moves in 2006 showed the vendor's urgency to find new markets for expansion

Cisco made no blockbuster buyouts in 2006. The US$256 million in announced cash and stocks it shelled out for acquisitions this year is chump change compared with 2005, when it began the year buying Airespace for US$450 million, and ended it with the US$6.7 billion Scientific-Atlanta merger.

But Cisco's moves in 2006 showed the vendor's urgency to find new markets for expansion. Video technology was a major draw for Cisco M&A money this year, with purchases of three companies in the video surveillance, video-on-demand and streaming content markets, respectively.

And there's a method to these mergers: "[Video] is the killer application for network load," Cisco CEO John Chambers said earlier this year. Bigger network loads beget bigger routers and switches, which beget more sales and market share for these products -- which still brings in two-thirds of Cisco's product revenue.

Three other acquisitions in 2006 expanded Cisco's VoIP and collaboration technologies, while it also shored up a few of its core technology areas, such as security and Ethernet switching, with another two buyouts.

Here's a rundown:

SyPixx Networks

Acquisition announced:March 7
Headquarters:Waterbury, Connecticut, U.S.
Acquisition cost:US$51 million in cash
Market:Physical security

Cisco's first acquisition this year was SyPixx Networks, which makes IP video surveillance hardware and software. The deal gave Cisco another new toy for its Emerging Technology Group, a trend that would continue throughout the year.

SyPixx's technology allows analog video surveillance gear, as well as IP-based cameras, to be converged on an IP network, as well as managed and recorded from a central data centre. The acquisition put Cisco in the physical security market, one of the vendors emerging-technology areas, according to Chief Development Officer Charlie Giancarlo.

Over the last few years, video surveillance was among "the most boring industries any one could imagine," Giancarlo said at a conference recently. "It's highly vertical. Security cameras go to a security monitor, and 95% of it today is analog, not even digitized."

He outlined a scenario where IP-enabling video surveillance could be a benefit. "If an enterprise experiences a theft," he said. "instead of going through eight hours of tape from the night before, [you could] trigger a video from a few minutes before, to a few minutes after" an event, such as a security alarm, occurs. IP-based video would also allow security personnel to view video from Wi-Fi-enabled video devices, he added.

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Acquisition announced:June 8
Headquarters:New York City
Acquisition cost:US$19.8 million in cash

Cisco bought this developer of VoiceXML applications to strengthen its call-centre software offerings. Before the buyout, Audium's software was already used as an add-on feature for Cisco's Customer Voice Portal software -- a self-service call centre application, which allows phone callers to retrieve data through voice recognition technology.

Cisco says the Audium software will enable customers to more easily build systems that can access database information through automated voice-response -- an interface, which in the past was difficult to build due to the proprietary nature of voice-response technology and the customized code required to tie voice systems to backend software.

Cisco loves VoiceXML so much, the company made it a feature in its most recent IOS software release, allowing Cisco routers to more easily interpret and handle VoiceXML messages.


Acquisition announced:June 8
Headquarters:Austin, Texas
Acquisition cost:US$28 million

Metreos, also a Cisco partner when it was acquired, was a maker of software for integrating business software systems with Cisco's Unified Communications products -- the vendor's enterprise VoIP transport and applications products, such as CallManager and Unity. Cisco announced plans to purchase Metreos as a separate deal on the same day it announced the Audium buy. The purchases of both Metreos and Audium were more of a move to secure these technologies in Cisco's portfolio, rather than an entry into a brand new market, as with the SyPixx acquisition, analysts said. (Cisco picking up smaller technology partners is another trend that continued through 2006).

"Both Audium and Metreos products are already tightly integrated with Cisco's offerings," wrote Steve Cramoysan, an analyst with Gartner, in a report on the two deals. "Technically, the acquisitions don't signal a big change. However, by preventing another vendor from acquiring the tools, the acquisitions reduce the risk for Cisco's channels, independent software vendors and Cisco customers building applications with the tools."

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Meetinghouse Data Communications

Acquisition announced:July 6
Headquarters:Portsmouth, New Hampton, U.S.
Acquisition cost:US$43.7 million in cash and assumed options
Market:Wireless LAN security

Cisco looked to wireless LAN security vendor Meetinghouse to shore up its client-based security and network access technology. Meetinghouse's AEGIS SecureConnect software includes an 802.1X supplicant, which allows a laptop or PC to authenticate to a wired or wireless LAN with a single piece of software. The software does this by covering an array of protocols: Extensible Authentication Protocol, Wired Equivalent Privacy, Wi-Fi Protected Access, and Temporal Key Integrity Protocol and Advanced Encryption Standard for encryption. Cisco turned this acquired technology around in October, releasing Secure Services Client 4.0, based on the Meetinghouse product.

Analysts say the move gave Cisco ownership of a unified access client, since its previous partner, Funk Software, was purchased by rival Juniper in 2005. While filling the client-software gap in Cisco's Network Admission Control offering, the purchase might threaten the efforts of the Trusted Network Connect initiative, according to Lawrence Orans, a Gartner analyst.

With Meetinghouse off the market, this leaves "no independent 802.1x supplicant vendors to provide a neutral position for unifying the NAC infrastructure vendors," Orans writes in a report. "Cisco has submitted draft CNAC protocols to the Internet Engineering Task Force, but other vendors have yet to adopt these protocols."

Arroyo Video Solutions

Acquisition announced:Aug. 21
Headquarters:California and Utah, U.S.
Acquisition cost:US$92 million in cash
Market:Carrier video

With its first carrier-focused acquisition of the year, Cisco kept up its enthusiasm for IP video as it bought Arroyo for its video-on-demand video delivery technology. The Arroyo gear will let cable TV providers offer more interactive and on-demand content, with more efficiency. Cisco said it plans to integrate this technology into its cable TV offerings, which include broadband aggregation routers for Cable modem services, as well as its Scientific-Atlanta cable TV technology.

Along with the Arroyo's technology, Cisco also snagged a few longtime network industry veterans in the deal. Arroyo's chief scientist, Drew Major, was a founder of Novell and its former chief scientist. CTO Paul Sherer used to hold 3Com's CTO spot.


Acquisition announced:Oct. 25
Headquarters:San Jose
Acquisition cost:US$31 million in cash
Market:Fixed-mobile convergence

Cisco looked to the mobility market with its Orative purchase plan, but stuck with its trend of buying smaller partner companies. Orative makes software that allows cell phones and smart phones to access Cisco VoIP, messaging and collaboration servers. The cell phone client software also allows corporate cell phone users to take calls made do their internal desktop phone extensions. Orative also makes a gateway and server product, allowing cell phone clients to access corporate servers securely through a firewall, the company says.

The purchase gave Cisco an entrance into the emerging fixed-mobile convergence (FMC) market. FMC ties together cell phones and corporate desktop phones, allowing for easier communications with employees. It also provides better control of corporate data and information -- which often lives on the personnal cell phones of employees.

"This is going to be a huge, huge market," said Craig Mathias, principal of the Farpoint Group, in a previous interview. "Most enterprises are completely unaware that there's lots of sensitive data sitting on devices they have no control over. Big companies that have corporate secrets all over the place on unsecured cell phones have to figure out how to manage that."

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Greenfield Networks

Acquisition announced:Nov. 13
Headquarters:Sunnyvale, California, and Bangalore, India.
Acquisition price:Not disclosed
Market:Carrier Ethernet

Cisco got geeky with its seventh buyout of 2006: Greenfield Networks, which makes chips for metro Ethernet switches. This was the first pure-networking acquisition of the year for Cisco, and one that might seem odd, since the vendor was tops in the US$837 million global metro Ethernet market for the second quarter of 2006, according to research firm Infonetics.

With carrier Ethernet sales expected to double by 2009, Cisco decided not to chance letting second-place Alcatel or Juniper with its recently announced Metro Ethernet gear creep up in the market. Greenfield makes Ethernet switch silicon and switch fabric components that do things Cisco's technology can't. One piece of Greenfield silicon can process packets for 24 Gigabit Ethernet ports, or 3 10G Ethernet ports onto a single chip -- and boasts IPV4 and IPv6, MPLS, and Layer 2/3 IP VPN packet processing features. The start-up's switch fabrics are also impressive: 12 10Gbps Ethernet fabric ports, with up to 240Gbps of total switching capacity. Expect Cisco to put these powerful chips into compact metro Ethernet gear, and possibly enterprise Ethernet gear, in 2007.


Acquisition announced:Dec. 15
Headquarters:Half Moon Bay, California
Acquisition price:Not disclosed

Cisco's announced plan to buy out Tivella will stand as the company's final acquisition of the year, unless there is a last-minute deal. The Tivella acquisition was as curious and out-of-character as Cisco's first deal of the year. This focus this time was -- of course -- on IP video technology; and the company it bought -- you guessed it -- was a Cisco technology partner prior to the deal.

Tivella makes tiny network appliances, about the size of a cable modem, which plug into an Ethernet network and stream video content to digital billboards and displays: Think flight arrival/departure screens in airports or flat-panel monitors in retail stores showing advertisements. This gadget, called Piccolo, sits under or behind a flat-panel plasma display or LCD and connects via standard audio/visual inputs. An Ethernet jack, or WLAN option, ties the device back to the network for centralized control. Tivella also makes software to control the distribution of content on digital signs attached to a network.

Clearly, Cisco is tired of its gear humming away in obscurity in wiring closets and data centers. Earlier this month, Cisco demonstrated a version of its Piccolo-based Digital Media Player (which it plans to release in 2007), with Cisco's new logo prominently displayed on the front of the box.