Cisco Systems Inc. (CSCO:US), the world’s largest maker of networking equipment, agreed to buy Intucell Ltd. for about $475 million, gaining technology that helps wireless carriers manage their networks.
Cisco will pay cash and retention incentives to acquire the closely held company, which is based in Ra’anana, Israel, according to a statement today. The deal is expected to be completed in Cisco’s fiscal third quarter, which ends in April.
The acquisition is part of an effort to get more revenue from wireless carriers, which are stepping up their capital spending to handle more traffic. Smartphones, tablets and other mobile devices have increased congestion, boosting demand for services that help fine-tune networks.
“It is logical that Cisco is adding technology via M&A in this area,” said Kevin Stadtler, president of Stadtler Capital Management, an investment advisory firm specializing in technology. “Carriers like AT&T are deploying Intucell’s technology to manage their network in real time to improve the quality of customer experiences.”
Intucell’s technology relieves congestion on an overloaded cell tower by automatically instructing nearby towers to help out, said Stadtler, whose firm doesn’t own Cisco shares.
Cisco is seeking new sources of growth after a failed effort to expand into consumer products. Over the past two years, Chief Executive Officer John Chambers has eliminated thousands of jobs and closed businesses such as the Flip video- camera unit amid a slowdown in sales.
Intucell employees will join Cisco’s Service Provider Mobility Group, which serves wireless carriers.
“The mobile network of the future must be able to scale intelligently to address growing and often unpredictable traffic patterns, while also enabling carriers to generate incremental revenue streams,” Kelly Ahuja, a Cisco senior vice president who runs the division, said in the statement.
Shares of San Jose, California-based Cisco fell 1.2 percent to $20.62 at the close in New York. The stock climbed 8.7 percent last year.
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