Cisco continues its inorganic growth strategy with its recent $2.9 billion acquisition of Starent

Cisco systems, which is a well know brand in the networking and communications space, is on a major expansion spree with its recent acquisition of Starent Networks. The $2.9 billion deal aims to leverage Starent’s mobile infrastructure capability by enabling Cisco to provide a strong architecture for rich, quality multimedia experiences to mobile subscribers.

Starent has an extended expertise in delivering high quality content such as video, mobile TV and gaming to mobile subscribers. With the rapid explosion of content downloads from mobile phones, especially video transfer, mobile data traffic has seen an exponential growth in recent times. A recent forecast conducted by Cisco, the Visual Networking Index (VNI) forecasts mobile data traffic to reach one Exabyte or one billion gigabytes per month.

Cisco went further to research the changing behaviour of mobile consumers, with an ever increasing trend to access high speed multimedia services on their phones ranging from IPTV, to videoconferencing, to Video-on-demand. In order to gain a stronghold on this huge growth potential Cisco is building its technology capabilities to serve this demand, and the recent acquisition of Tandberg, was a definite step in this regard.

Tandberg, which is a leader in video communications, would enable Cisco to expand its collaborations portfolio, and would bring it a step closer on revolutionizing communication, and the way people interact and share knowledge. In fact Fredrick Halvorsen, the CEO of Tandberg said that there was indeed a fit between the two companies, not only in terms of their solution offerings but also a people and culture fit. Adding to that he also said that the companies share a common vision, of transforming the way people communicate, and the acquisition would lead to faster decision making and innovations in this regard.

The recent acquisitions of Starent and Tandberg make Cisco’s strategies very clear, and it also hints the company would soon diversify as a Smartphone provider. Current Smart phones are limited in terms of their multimedia interaction and still have some way to go, when it comes to two way wireless interaction. Cisco aims at leveraging its IP infrastructure capabilities, with that of its recently acquired companies to be a provider that would enable fast, streaming video and multimedia interactions through a wide range of access points.

However mobile phone providers like Apple, RIMM and Nokia would provide stiff competition. It is a crowded market and Cisco is yet to establish itself as a strong brand in the consumer electronics market. It is no wonder therefore, that Cisco is focusing on its brand building campaigns through extensive advertising to create a higher level of brand awareness in this space.

How far this strategy of concentric diversification and rapid inorganic expansion is profitable to the company in the long run is still to be seen. However, in this stiff competitive market, the resulting winner will be the consumer, who would benefit from a revolutionized means of communication in the near future.