Lean times create awesome opportunities. If you have money
to spend, you'll find a few
great deals.
And I'm not just talking about us individual investors
shoveling cash into truly great businesses that are
trading at a discount to their true worth. Networking
giant
Cisco Systems (Nasdaq: CSCO) already
spent a few billion dollarson
buyoutsthis year, and is not closing its
outsized walletyet. Today, Cisco bought mobile
communications specialist
Starent Networks (Nasdaq: STAR) for $2.9
billion in straight cash.
Starent brings along an impressive portfolio of customers
for its mobile infrastructure products. The list includes
both
Sprint Nextel (NYSE: S) and
Verizon (NYSE: VZ) here in North America, as
well as
China Telecom (NYSE: CHA) and
Vodafone (NYSE: VOD) abroad.
Not that Cisco didn't already have a set of mobile
networking technologies -- the company can supply every piece
of hardware you need to build a
WiMax network in Kazakhstan, for example. But Cisco is
paying a meager 20% buyout premium to add Starent's heft to
its own. The combination creates a single brand that
translates into "rich, quality multimedia experiences to
mobile subscribers on 3G and 4G networks," according to
Starent CEOÂ Ashraf Dahod.
Management expects the deal to start adding to Cisco's pro
forma earnings by 2012, and Starent has a stellar track
record of earnings growth in recent years. Starent also comes
with a highly committed management team that
owns a significant portion of the company. If Cisco
treats them right, Starent's leaders
should become highly effective lieutenants in their new
home.
Including today's 17% pop, Starent's share price has
tripled in 12 months. I don't think
Cisco's spending spreeis over yet. What will the
networking titan buy next? Share your educated guesses in the
comments below.
This article was originally published as
Where Will Cisco's Buying Binge End?on
Fool.com
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