News Column

Cisco to Acquire British Firm Ubiquisys

April 3, 2013

Jeremy C. Owens, San Jose Mercury News

Cisco headquarters (file photo)
Cisco headquarters (file photo)

Cisco (CSCO) announced the planned acquisition of British firm Ubiquisys on Wednesday, continuing two trends: A focus on foreign companies as a statement against U.S. repatriation taxes and expansion of services for telecommunications companies.

The networking giant agreed to pay $310 million for Ubiquisys, which specializes in so-called small-cell technology -- less-powerful cellular bases used to boost wireless reception in areas where it is poor.

"Cisco is 'doubling down' on its small cell business to accelerate strong momentum and growth in the mobility market," Cisco senior vice president Kelly Ahuja said in Wednesday's news release.

Analysts were generally pleased with Wednesday's acquisition and Cisco's continuing expansion of its wireless-carrier technology. The company committed nearly half a billion dollars on Israeli networking-software company Intucell in January, a company that also focuses on technology for wireless carriers, and purchased Denver-based carrier-network-services company BroadHop in late 2012.

"Ubiquisys is a smart play and will allow Cisco a larger role in the growing wireless sector," S&P Capital IQ analyst James Moorman said in an email Wednesday.

"We believe small-cell technologies are one of the most cost-effective ways to add data capacity and will grow in importance as service providers address the explosion of mobile network traffic. In our view, the acquisition adds to the mobility capabilities Cisco has been building up," ISI Group analyst Brian Marshall wrote.

Cisco is battling another Silicon Valley giant known for acquiring smaller companies in this vein: Oracle (ORCL), which has purchased two telecom-related companies in 2013, Tekelec and Acme Packet. Enterprise offerings for wireless carriers are considered a growth business, especially in developing foreign markets, where adoption of smartphones is still growing.

Ubiquisys is the fourth company Cisco has acquired so far this year, and all four are based overseas, where the company has a cash hoard stashed that it does not want to bring back to the U.S. for tax reasons. Besides Intucell and Ubiquisys, Cisco has acquired Czech network security company Cognitive Security and Austrian cloud-services company SolveDirect.

In a February interview with CNBC, Cisco CEO John Chambers said his company would acquire only foreign companies as long as its overseas stash of cash -- more than $41 billion, according to an analysis of the company's federal filings -- remained outside of the U.S. Chambers said the company would not bring the cash back unless the country's repatriation taxes were lowered.

"If the majority of our money remains outside the U.S., and this depends on tax policies, that's where you'll see us acquire going forward," Chambers told CNBC.

The San Jose company's stock bounced higher Wednesday morning after the acquisition was announced, even as indexes declined on Wall Street. At the end of the morning trading session in New York, Cisco shares were trading for $21.31, a gain of 0.4 percent; the three major U.S. indexes declined between 0.45 percent and 0.65 percent by 9 a.m. Pacific time.

Source: (c)2013 the San Jose Mercury News (San Jose, Calif.) Distributed by MCT Information Services

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