I looked at the Starent acquisition through a Cisco prism earlier today, trying to fathom what it might suggest about the networking giant’s subsequent moves to capture its fair share of the mobile-video opportunity.
What about Cisco’s (and Starent’s) competitors? How are they affected by the deal?
Eric Savitz at Barron’s Tech Trader Daily quotes Avi Cohen, research chief at Avian Securities, as saying the news is particularly bad for Juniper Networks.
According to Cohen, as captured by Savitz:
“. . . . this acquisition is extremely negative because it significantly impacts JNPR’s ability to compete for mobile core infrastructure builds such as LTE. This puts Cisco into play within the mobile infrastructure sector, which the company has not had much success in over the past 18 months…Cisco is intent on remaining relevant within the core networking equipment segment and snatching STAR out from under JNPR is an indication of how far Cisco will go to maintain its market share within core networking accounts.”
Cohen thinks Alcatel-Lucent, Nokia Siemens, and Juniper might consider topping Cisco’s bid for Starent, but he believes the size of the deal is likely to discourage them from making an offer.
From what Alcatel-Lucent’s CEO Ben Verwaayen has said recently, he doesn’t believe M&A activity will be his company’s path to deliverance. In light of his company’s M&A history, one can hardly blame him.
Before announcing the Starent deal, Cisco had $35 billion in cash, but only $6 billion of that total was available domestically. The rest of Cisco’s cash pile is overseas.
It’s conceivable that Cisco could use its US-based cash to outbid any competing offer, but, if it did so, Cisco might be constrained from making further all-cash US-based acquisitions in the near term.