Cisco Confirms Wireless Commitment, Pulling Trigger on Navini Acquisition

| Oct 25, 2007 | Wireless Infrastructure | Competitive Intelligence Report

| Analysts: Peter Jarich, Virginia Lee

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

On October 23rd Cisco announced a definitive agreement to purchase Navini Networks, Inc., a manufacturer of mobile WiMAX (802.16e-2005) solutions, for approximately $330 million in cash and assumed options. Navini provides Cisco with patented beamforming technologies, beamforming and MIMO IPR, and more than 75 customers. Expected to close in Q2 2008 of Cisco’s fiscal calendar (ending in January 2008), Navini will be integrated into Cisco’s Wireless Networking Technology Group.

Recommended Competitor Actions

• Every major wireless vendor targeting WiMAX – Alcatel-Lucent, Motorola, Nortel, NSN and Samsung – needs to aggressively target Navini’s customer base. Navini has proven that it can upgrade existing pre-WIMAX deployments to WiMAX with a software upgrade. The move, however, is not necessarily painless or inexpensive. While Cisco brings Navini into the fold (with the normal sales and support disruptions) competitors are in a position to cut off early momentum and deal a blow to the company’s credibility.

• Alcatel-Lucent and Arraycomm need to highlight the practical value of beamforming in WiMAX networks.

• Juniper should consider following Cisco’s lead and make a move into WiMAX via acquisition.

• NEC and Fujitsu need to update the market on their WiMAX solutions and market traction.

• As soon as possible, Ericsson needs to consider releasing the results of its LTE and HSPA+ field trials.

• Starent needs to take this opportunity to redouble its ASN sales and partnership efforts. Cisco has previously worked with various WiMAX vendors including Alvarion, Aperto, Redline, etc. These relationships combined with its market position made it a natural ASN supplier into them.

Recommended End User / Customer Actions

• Would-be WiMAX customers need to look for progress on how well Cisco ramps up its network integration and wireless network planning capabilities. Yes, work with WiFi gives Cisco an understanding of wireless. This does not, however, translate into beamformed, wide-area, high-power deployments in licensed spectrum. Likewise, though Navini will bring this type of expertise, it’s a small company – one without the service support capabilities necessary to target the customer base Cisco obviously hopes to tap.

• Would-be WiMAX customers should push Cisco to develop WiMAX solutions for specific vertical markets. Any operator hoping to earn a return on its WiMAX investment will want to target multiple user constituencies: consumers, enterprises, municipalities, government offices, etc. With insights into the enterprise and vertical markets such as public safety, Cisco should be able to help operators push into these opportunities.

• Navini’s current customers need to leverage the company’s new owner for better network deals and terms. As Cisco pushes into the WiMAX market, it will be loath to lose any customers who can attest to its capabilities and help it better understand the market for its gear. To this end, it should be willing to cut existing customers attractive deals, on Navini’s WiMAX products as well as its own routing, transport and service delivery kit.

• Operators should consider pushing Cisco on support for WiMAX base stations without integrated beamforming. Beamforming has clear benefits in terms of cell coverage, and potentially capacity (where improved signal strength can be delivered). It also, however, adds to the costs of a base station and may not be needed where an operator simply wants to deliver coverage into a hotspot or urban area. Knowing this, Navini surely had plans to develop simpler, cost reduced products – operators must be sure that the acquisition and integration process does not derail these plans.

CLIENTS ONLY

Analytical Summary

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

Recommended Competitor Actions

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