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Cisco Plucks P-Cube for $200M

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Cisco Systems Inc. (Nasdaq: CSCO) continued amassing its traffic-management arsenal with the $200 million acquisition of P-Cube Inc., announced this morning.

The deal is expected to close in Cisco's first quarter, which ends in October (see Cisco to Acquire P-Cube). Upon acquisition, the P-Cube team will report to Pankaj Patel, vice president and general manager of Cisco's broadband edge and midrange routing business unit.

The companies haven't drawn up plans for P-Cube's 118 employees, but Cisco hopes to "bring the majority of them over," a spokesman says. [Ed. note: Statistically, that could mean 50.1 percent.]

P-Cube's acquisition seems a no-brainer (see P-Cube Tiptoes Into the Top Ten). The company has developed hardware engines that can monitor traffic at Layer 7, distinguishing traffic flows in ways traditional routers can't. The deal follows Cisco's acquisition of Parc Technologies Ltd. and its investment in Corvil Ltd., both of which help spread traffic more efficiently around a network (see Cisco's Parc Purchase: An MPLS Play and Corvil: Another Cisco Secret?).

In each case, the idea is to help service providers conform to service-level agreements and to spot traffic problems more quickly. P-Cube, for example, has pushed itself as an answer to peer-to-peer woes, because its boxes can detect a bandwidth-sucking P2P connection and isolate it. From there, the service provider can limit the bandwidth to that connection, charge more to that user, or cut off the session entirely.

Given carriers' constraints on capital expenditures and operating budgets, it's no surprise to see Cisco picking up these kinds of tools. "Cisco lately has been picking up a number of different technologies that enhance the reliability of IP services," says Abner Germanow, analyst with IDC.

The P-Cube acquisition would seem a nice foil to the Parc pickup, but the two startups are headed for different divisions within Cisco. As a result, Patel couldn't comment on the ways the two acquisitions might combine forces.

Cisco would first apply P-Cube to DSL and cable networks, Patel says. What's interesting about P-Cube is that the technology can be applied to nearly anything, so it's easy to envision P-Cube winding its way into every nook and cranny at Cisco. "The technology could be available in all of those platforms from mid-range routers up to the core," Patel says.

Other companies are looking in this direction as well. Nortel Networks Ltd. (NYSE/Toronto: NT) last month touted a "content aware" billing scheme put together for T-Mobile International AG (using technology that did not come from P-Cube, Nortel officials say, dispelling a rumor from one message-board poster). The idea was to put voice and data on the same network while allowing the carrier to bill more for the data -- yet another application that P-Cube has tackled. (See T-Mobile Teams Up With Nortel and P-Cube Eyes Incumbents.)

Cisco would continue to sell P-Cube's appliances after the acquisition but would integrate the technology into routers as well. Software-based applications could begin appearing in Cisco routers in nine to 12 months, while linecards using P-Cube's FPGA-based hardware might appear in 18 to 24 months, according to Patel.

And of course, P-Cube is facing its share of competition from other startups such as CacheLogic Ltd. (see CacheLogic: Another P-Cube?). There's also CPlane Inc., a U.S. startup born of the same R&D project as Corvil, which boasts as partners Nortel, Juniper Networks Inc. (Nasdaq: JNPR), and Redback Networks Inc. (Nasdaq: RBAK).

P-Cube was founded in 1999 and has raised $65 million in three rounds (see P-Cube Nabs a $35M Series C). The company got off to a tough start when a major customer landed in receivership (see P-Cube's Party Marred by Interoute Flop). Since then, it's caught the eye of several incumbents including BellSouth Corp. (NYSE: BLS) and UTStarcom Inc. (Nasdaq: UTSI). (See P-Cube Salsas With BellSouth, UTStarcom Selects P-Cube, and P-Cube Wins Wireless Customers.)

— Craig Matsumoto, Senior Editor, Light Reading

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12/5/2012 | 1:20:08 AM
re: Cisco Plucks P-Cube for $200M

Cisco has a product called the CSG that competes with the P-Cube offering, in the wireless space. Both have commercial contracts. It will be interesting to see what Cisco does with P-Cube's wireless business - will they all be replaced with the CSG/SSG? Or will Cisco phase out the CSG product ?
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