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Cisco spends $135 million on XML firm

Network gear maker gives its Web services business a boost with the acquisition of Reactivity.

Cisco Systems said Wednesday it will spend $135 million in cash and options to buy Reactivity, a small company that makes equipment to help route XML Internet traffic.

Reactivity's equipment is designed to help companies more easily and quickly deploy XML (Extensible Markup Language), a standard for Web documents. The company, which is based in Redwood City, Calif., was founded in 1998 and has 56 employees. Cisco said it expects the deal to close in its fiscal third quarter, which ends April 28.

Cisco is the No. 1 provider of infrastructure equipment to companies large and small. The company's bread and butter has been the sale of Ethernet switches and IP routers, which are used to shuttle Internet traffic throughout corporate networks and across the open Internet.

But in recent years, Cisco has been expanding its product portfolio in several different areas. It bought Scientific-Atlanta last year to beef up sales to large services providers by offering them video and cable infrastructure gear. It purchased Linksys in 2003 to enter the home networking market. And now the company is beefing up its Web services business to sell more "intelligent" equipment to its corporate customer accounts.

The technology and products Cisco gets with the purchase of Reactivity apparently fit well into its existing Application-Oriented Networking (AON) business unit. AON was created almost two years ago to develop products that offer more sophistication to Cisco's current networking hardware line. The AON products are "application aware," which means that they can inspect information that's being transmitted and route messages based on predefined policies.

The Reactivity product is a specialized piece of hardware that combines software to help companies deploy, control and increase the amount of XML traffic they have throughout their network. The Reactivity XML Gateway software helps companies support and provision new XML-based Web services, and the Reactivity XML Manager software provides real-time visibility and analysis for companies using XML services, according to Reactivity's Web site.

Cisco isn't the only company buying up XML appliance start-ups. A year and a half ago, IBM, a longtime Cisco partner, bought a small company called DataPower, which also makes appliances to help companies deploy and manage XML Web services. Computer chipmaker Intel is also in this business with a company it bought in 2005 called Servaga.

One of the reasons that specialized XML network appliances have emerged is because of the growing use of XML and XML-based Web services protocols. These standards are designed to allow for better interoperability between systems, but they also bring about performance problems from processing XML documents. Dedicated appliances can help alleviate those issues.