SAN JOSE -- Networking giant Cisco Systems (CSCO) announced Wednesday that it has agreed to pay $475 million for Intucell, an Israeli company that produces networking software that allows wireless carriers to handle the increasing traffic on their systems.
With customers connecting more powerful smartphones and tablets to cellular networks, carriers face a growing burden that Intucell's self-optimizing network, or SON, software can help them manage, Cisco said in Wednesday's announcement.
"The mobile network of the future must be able to scale intelligently to address growing and often unpredictable traffic patterns, while also enabling carriers to generate incremental revenue streams," Kelly Ahuja, senior vice president and general manager of Cisco's Service Provider Mobility Group, said in the news release.
Intucell was founded in 2008 by CEO Rani Wellingstein and Ido Susan, who is currently vice president of products.
The deal is also a big victory for venture capital firm Bessemer Venture Partners, which was the sole investor in Intucell's 2011 Series A funding round. Bessemer put $6 million into the company in exchange for a nearly 50 percent ownership stake, according to sources familiar with the investment, then helped the company land a $50 million contract with AT&T that spurred massive growth.
Cisco will pay the $475 million in cash as well as incentives to Intucell employees to stick around and work for the San Jose company. Cisco expects the deal to close in the current quarter, its fiscal third quarter.
The Intucell acquisition may be just a start for Cisco as well, as CEO John Chambers said late in 2012 that the company's security-software leader, Chris Young, has a "blank check" to boost the company's security offerings, according to a Reuters report released last week. That report also noted that Cisco has acquired almost 160 companies in the past 20 years.
Cisco stock did not receive a bump on Wall Street from Wednesday's news -- the stock fell 1.2 percent to $20.62. The company is scheduled to release earnings results from its fiscal second quarter Feb. 13.
Staff writer Peter Delevett contributed to this report. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.