Cisco Systems Inc. (Nasdaq: CSCO) is continuing its push into applications territory, announcing today a bid to acquire Reactivity Inc. , a vendor of XML-processing appliances.

The $135 million cash deal is expected to close by the end of April. Reactivity's 56 employees would be folded into Cisco's Datacenter Switching and Security Technology Group, headed by senior vice president Jayshree Ullal. (See Cisco to Buy Reactivity.)

Cisco will continue offering Reactivity's gear, but it's also eyeing the possibility of applying Reactivity's technology to other gear to provide WAN acceleration and security.

It's all part of the push by Cisco and others to create application-aware networks. As more applications come to use XML as their language for sending information, networking gear has had to add XML processing to its duty roster.

For carriers, XML is a keystone to service-oriented architectures (SOA), where an enterprise converts its operations into Web-based services. (See XML Networking's Carrier Appeal.)

So continues an XML mini-frenzy that popped up in 2005, when Intel Corp. (Nasdaq: INTC) bought Sarvega and IBM Corp. (NYSE: IBM) grabbed DataPower. (See Intel Absorbs XML Startup and IBM Plugs Into DataPower.)

Cisco had made its XML move months before that with its Application-Oriented Networking (AON) strategy, which was followed up a year later by its Service Oriented Network Architecture (SONA). (See Cisco Speaks Applications and Cisco Everywhere: Meet SONA.)

Both strategies involve making the network more aware of applications. At the time, though, companies like IBM were already working the opposite route -- giving applications more intelligence about the network.

For its part, Cisco says the Reactivity deal doesn't signal a strike at anyone like IBM. "We are focused with this technology on players we compete with in the application switching market," says George Kurian, vice president of Cisco's applications delivery business unit. Presumably that means the Layer 4 through 7 companies like F5 Networks Inc. (Nasdaq: FFIV) or Packeteer Inc. (Nasdaq: PKTR), although Kurian wouldn't name specific competitors.

Still, others see Cisco inevitably finding new competitors as it gets into new areas like XML. "Clearly, Cisco is more and more in the battle against some of the server and software companies in the data center," says Bill Choi, an analyst with Jefferies & Company Inc. .

Any real clash between the likes of Cisco and IBM is still years away though, Choi says. In part, that's because data center virtualization hasn't caught on. Choi believes the idea has won over a few large enterprises but hasn't become widespread.

As for where Cisco's XML technology has been coming from, the company's used Layer 7 processors from Tarari Inc. Neither side appears to have ever announced this, but the deal was well known in the industry; Reactivity even remarked on it in a press release. (See Reactivity Welcomes Cisco.)

Reactivity has announced it's using Tarari, so the chip maker's relationship with Cisco doesn't appear to be in jeopardy.

— Craig Matsumoto, West Coast Editor, Light Reading