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Cisco buying WiMax start-up for $330 million

Networking equipment giant switches gears and takes the plunge into WiMax with the acquisition of Navini Networks.

Cisco Systems is getting into the WiMax market.

The networking equipment maker said Tuesday that it will spend $330 million in cash and assumed options for Navini Networks, a Richardson, Texas-based start-up that makes mobile WiMax equipment.

Navini is a pioneer in "smart beamforming" technologies. It also uses multiple-input multiple-output, or MIMO, antennas. The combination of the technologies improves the speed of the data transmission and the range of WiMax radios. Overall, the technology lowers deployment and operational costs for network service providers because fewer radios are needed to transmit the wireless signals.

Navini is just one company in the crowded WiMax market. Cisco, which has an extensive portfolio of Wi-Fi wireless technologies, acquired from companies, such as Linksys and Airespace. Cisco had been rumored for the past several weeks to be eyeing WiMax start-ups and, before it chose Navini, was also supposedly looking at other potential WiMax candidates including Airspan Networks, Alvarion and Redline Communications.

WiMax has recently been touted as the fourth generation of wireless technology, or 4G wireless. Mobile WiMax promises to offer data speeds faster than current 3G wireless networks and over much longer distances than comparably fast Wi-Fi technology, which today is used mostly indoors to provide wireless broadband hot spots. Major infrastructure players, including Motorola, Nokia Siemens and Samsung, also offer WiMax products.

WiMax is seen as particularly useful in the developing world where fixed infrastructure is scarce or nonexistent.

Suraj Shetty, senior director of service provider marketing for Cisco, said the company is buying Navini to address the wireless broadband in the developing world.

"Through this acquisition, we are focused on delivering broadband wireless in emerging markets, such as India, China and Eastern Europe," he said. "In these countries, cell phone penetration is high, but broadband penetration is not. And that's largely because of the lack of infrastructure."

While Navini's technology could be viewed as complementing Cisco's existing Wi-Fi portfolio, it does signal a slight shift in strategy. For the past few years, Cisco's executives, including Chief Development Officer Charles Giancarlo, have publicly criticized WiMax. But now it looks like Cisco has shifted gears.

Shetty said that some of this is due to the natural progression of the mobile WiMax technology, which last week received approval from the United Nation's International Telecommunication Union as a third-generation wireless technology. This distinction puts the technology on par with other major wireless standards, such as HSDPA and EV-DO. Ultimately, its acceptance should help pave the way for nations around the world to allocate the necessary spectrum and adopt the technology.

Motorola and Intel have been among the most fervent backers of WiMax. Each company says it will have products for mobile WiMax in the market sometime in 2008. While many experts see WiMax as a potentially important technology in the developing world, some say it's not well suited for developed countries, such as the United States, where operators have already spent billions of dollars on 3G wireless spectrum licenses.

Sprint Nextel is the only major carrier in the U.S. to say it will use WiMax. The company has committed spending $5 billion over the next few years to build the nationwide WiMax network using its 2.5GHz spectrum. But justifying the expense of the network as the company loses regular cell phone subscribers hasn't been easy, and the company has joined forces with another provider called Clearwire that also plans on building a nationwide WiMax network.

The Navini acquisition is expected to close in the second quarter of Cisco's fiscal year.