Cisco's acquisition of Cariden latest effort to expand outside shrinking core business

Ethernet switch and router markets declined in third quarter, says IDC

As its core switching and router equipment market continues to shrink, Cisco is expanding in other areas of its business, the latest example being the acquisition of network traffic management firm Cariden Technologies for $141 million in cash.

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Cariden supplies networking planning, design and traffic management products for telecom services providers, enabling those providers to improve the efficiency of their converged IP and optical networks. Its customers include Verizon (NYSE: VZ), Deutsche Telekom, SingTel and Swisscom, according to a research note from Zacks Equity Research.

Cisco said the acquisition supports its open network environment (ONE) strategy by providing wide area networking (WAN) management capabilities, which enable telecom service providers to improve the programmability of their networks and efficiency of network assets across the IP and optical transport layers.

The Cariden buy marks the third Cisco acquisition in November. The other two are Cisco's acquisition of cloud networking firm Meraki for $1.2 billion and the data center software firm Cloupia for $125 million.

"We believe that these acquisitions will broaden Cisco's customer base and network offerings, providing the company with a significant competitive edge over its peers, namely Juniper Networks, Inc (NYSE: JNPR), Hewlett-Packard Company (NYSE: HPQ) and F5 Networks, Inc, which have been picking up market share," the research note explained.

According to the latest figures from IDC, the Ethernet switching market declined 4.4 percent in the third quarter of 2012 compared to the same quarter in 2011, while the router market declined 0.2 percent year-over-year.

Rohit Mehra, vice president for network infrastructure at IDC, attributed the market decline to a drop in the network edge/access segment, despite growth in the 10GbE core segment, which saw revenue growth of 10.7 percent year-over-year and port shipment growth of 61.4 percent year-over-year.

"10GbE along with the emerging 40GbE Ethernet switch segments are the ones to watch as growth in virtualized applications and converged infrastructure will continue to drive the need for advanced networks in datacenter buildouts," Mehra added.

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