Spend-happy Cisco systems has opened up its purse yet again, and shelled out some $2.9 billion for a company you've probably never heard of: Starent. What will interest you is that this should improve future smartphone powers.
Cisco paid $35 per share to acquire Starent Networks, according to its announcement yesterday, following its recent $3 billion acquisition of Tandberg for videoconferencing powers. Though Starent's worked with Verizon in the past, as well as other cell-phone companies with 3G and 4G networks and other next-gen services in the pipeline, it's one of those back-end companies that you never hear about. Starent's good at moving large amounts of digital data over a wireless network to a cell phone or connected computer.
While you could tie up this new purchase with Cisco's earlier video conferencing deal--both, after all, involve streaming huge amounts of data over a network--this purchase is really all about capturing a key technology partner with links to the booming smartphone phenomenon before 3G technology begins to get upgraded. According to Starent's Web page, its tech "is well positioned to simplify the mobile operator's migration to 4G networks through additional software on the same 3G platforms they've already deployed," which could lead to significant savings for the cell-phone companies, good news (potentially) for their millions of users.
Also, consider this purchase in the context of the highly embarrassing press and public storm that AT&T's got itself into, thanks largely to the iPhone. While the iPhone as a device was revolutionary all by itself, how its users interact with it is also a revolution for the smartphone business. Though it's captured only a smallish share of the handset sales market, iPhone users account for more than 50% of mobile Web surfing. It's the UI and features of the iPhone that give it this vastly disproportionate mobile surfing share, and while that's driven the device to success, it's been a headache for AT&T. With its Apple exclusivity contract, AT&T has had to work out how to optimize its network to stream this massive amount of data to its iPhone community--and it's often failed. Even the much-promised MMS facility was announced by Apple and available overseas long before AT&T implemented it on its grid, and the even more data-intensive option of iPhone data tethering to a PC is still a distant hope.
As other smartphones take up the iPhone's mantle, mobile data access is only going to leap upwards, placing an ever-bigger burden on cell-phone network providers, especially when the 4G/LTE roll-out begins and the era of the dumbphone draws to an end. All of which perfectly explains Cisco's decision.