Networking industry in flux

October’s major acquisitions highlight the seismic changes underway in the networking industry.

Cisco systems is a case in point. Its latest acquisition highlights a complete volte face since 2005, when its CTO Charles Giancarlo proclaimed: “We do not believe there is a good business model for WiMax. Wired technologies are already highly deployed in the developed world.”

But in October 2007, the company agreed to acquire WiMax equipment manufacturer Navini Networks for $330 million. Navini Networks makes a range of WiMax modems, base stations, adaptive antenna arrays and management software, all sold under the “Smart WiMax” brand. 

So why the change of heart? Despite Cisco’s initial misgivings, others in the industry saw potential in WiMax, and its potential has been building. As the leading kit supplier to the wired Internet, if ‘broadband over radio’ goes mainstream, Cisco could be in trouble. Naturally, Cisco’s wasn’t admitting to any such worries:  Navini’s technology “will play a key role” in our  ongoing broadband programme was all it said.

Meanwhile, 3Com, a competitor to Cisco, provoked an unexpected level of political interest when it agreed a $3.3 billion deal to be acquired by a group of private equity investments lead by Bain Capital Partners.

Such a deal would normally be routine, but under the proposed deal a 16.5% stake in the company would be transferred to Chinese telecommunications giant Huawei. This lead to calls for the acquisition to be blocked from US politicians fearful that the country’s interests could be harmed by the deal.

“It would be a grave error for US regulators to approve a deal that permits minority ownership in 3Com by one of the least transparent companies operating in China, a firm with shadowy ties to Chinese army and intelligence services,” said Ileana Ros-Lehtinen, a Republican state representative.

US politicians are notoriously sensitive about foreign governments gaining access to advanced technology. Given recent reports of Chinese  government sponsored hacking attacks, Ros-Lehtinen’s objections could yet gain support.

Further reading 

Crosstown traffic Three competing technologies – WiFi, WiMax and 3G broadband – promise to bring metropolitan wireless broadband services to all.

China's blueprint for cyber war

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Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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