Cisco nets Airespace for US$450 million

Cisco Systems Inc. this week confirmed plans to buy wireless LAN switch vendor Airespace for US$450 million in stock, following several weeks of speculation that Cisco was shopping for a WLAN switch vendor.

The deal gives Cisco a WLAN switching product line that can help small and midsize businesses deploy secure 802.11-based networks. The gear also complements Cisco’s market-leading Aironet wireless product line, and its Structured Wireless-Aware Network (SWAN) architecture, aimed at very large networks.

Under the terms of the agreement, Cisco will pay approximately US$450 million in stock and assumed options for Airespace. The deal, which is pending an anti-trust review by the U.S. Department of Justice, is expected to close by April 30, 2005.

Cisco said it will continue to market and support its Aironet and SWAN WLAN gear, in addition to taking on the existing Airespace customers. San Jose-based Airespace, founded in 2001, will become part of Cisco’s Data Center, Switching and Wireless Technology Group, headed by senior vice-president Luca Cafiero.

Airespace’s products centralize the management and features of WLANs on switches that control multiple “thin” access points (APs), which are basically 802.11 radios with minimal features, and are generally less expensive to deploy and easier to manage and secure, WLAN switch vendors say. Airespace products can also extend advanced features, such as roaming and security, down to other low-cost, third party WLAN APs.

Airespace’s products include the Airespace 4000 WLAN Switch, as well as APs and software for managing APs, WLAN authentication, radio frequency configuration and fast, uninterrupted connection handoffs for WLAN clients roaming between access points.

“Cisco has been in a kind of transition,” with its WLAN architecture direction, says Aaron Vance, an analyst with Synergy Research Group Inc. “Lately, they’ve tried to look more like the WLAN switching startup.”

Last May, Cisco released a product package that included a module for the Catalyst 6500 switch that centralizes management and control of Aironet APs and provides fast roaming and security features. But this package, with a price tag starting at over US$50,000, is geared more towards very large deployments with hundreds of Cisco APs and an extensive Cisco LAN.

“With Airespace’s products, you can get a functional WLAN system for under US$10,000,” says David Newman, president of Network Test, a Network World Test Alliance partner. “This will be more appealing to smaller customers, or to (non-Catalyst 6500) users.”

Cisco’s Airespace buy is also a thumb in the eye for competitors Alcatel SA, NEC Corp. and Nortel Networks Corp. These vendors recently announced partnerships with Airespace for a combination WLAN and VoIP package for business networks, using each vendor’s respective IP PBX gear, along with Airespace equipment, and Wi-Fi VoIP handsets from Spectralink Corp.

The future of these partnerships is now in doubt, as Cisco competes directly with Alcatel, NEC and Nortel in the IP PBX and LAN switch markets. Synergy Research Group’s Vance says the Airespace deal could be a harbinger to more WLAN switch market consolidation.

“There’s definitely a possibility of more consolidation, given that Airespace’s large partners — Nortel, Alcatel and NEC — are now left out in the cold.”

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