Cisco Systems Inc., the world’s largest maker of networking equipment, has agreed to buy Intucell Ltd. for about $475 million, gaining technology that helps wireless carriers manage their networks.
Cisco (Nasdaq: CSCO) will pay cash and retention incentives to acquire the closely held company, which is based in Ra’anana, Israel, according to a statement Wednesday.
The deal is expected to be completed in Cisco’s fiscal third quarter, which ends in April.
Intucell has developed self-optimizing network, or SON, software.
“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,” said Kelly Ahuja, senior vice president and general manager of Cisco’s Service Provider Mobility Group. “Through the addition of Intucell’s industry-leading SON technology, Cisco’s service provider mobility portfolio provides operators with unparalleled network intelligence and the unique ability to not only accommodate exploding network traffic, but to profit from it.”
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.
Shares of San Jose, California-based Cisco fell 0.6 percent to $20.75 at 10:08 a.m. in New York. The stock climbed 8.7 percent last year.
Cisco employs some 5,000 people in RTP, its second largest concentration of workers outside of its Silicon Valley headquarters.