Will Cisco Switch?

Rumors continue to circulate that networking giant Cisco Systems might acquire one of the WLAN central switch vendors… or not. For example, Unstrung.com reports that the rumors of a $425 million bid to get Airespace might be nothing more than the start of a bidding war to get companies like Nortel Networks and Alcatel fired up. Both companies are partners with Airespace.

Previous rumors had Cisco buying out Aruba Networks, another wireless switch vendor.

The question is… why buy when you are already number one?

Aaron Vance, senior analyst at Synergy Research Group, says that Cisco buying a WLAN switch company would “help them [Cisco] in the long run… it’s the way the market is moving, with a more central architecture instead of intelligent devices at the edge.”

Cisco and the other vendors are, of course, not talking. (Nortel especially isn’t talking, since it has some issues with the SEC, according to Unstrung, though the company may have the right of first refusal in an Airespace buyout.)

Rumors aside, Vance thinks a deal for Cisco to buy one of these switch vendors will go through: “It’s a necessary evil for Cisco at this point… Cisco can’t rest on its laurels and talk about its SWAN architecture anymore. They need to round out their portfolio. They won’t scrap Aironet [the existing distributed access points from Cisco], but they will be able to offer a wider variety of choices to customers.”

They better not scrap Aironet. According to Ina Sebastian, research associate at JupiterResearch, distributed WLAN architectures—those using full APs without much centralized intelligence—still dominate the enterprise.

In fact, in a recent survey, two-thirds of companies planning to deploy WLANs in the next 12 months said they prefer a distributed architecture.

Part of this might be inertia—people, especially IT people, use what they know works from past experience, and from well established companies they know, like Cisco—and the power of the companies themselves. Sebastian says that “wired network equipment manufacturers have a significant influence on the purchasing decisions of mid-size/large companies with distributed infrastructures,” impacting 26% of such companies.

Distributed WLANs has certainly worked for Cisco, which is the number one provider of enterprise WLAN equipment by a wide margin, according to Synergy. Vance says Cisco “will have to do some fast talking when it closes” such a deal, because of things they’ve said against centralized WLAN management in the past. However, it would be very consistent for Cisco to buy the frontrunner in a market they don’t have a hand in as yet. Think Linksys, which it bought early in 2003 to get into the home networking market.

“If they get either Aruba or Airespace, Cisco will be getting a strong acquisition in terms of talent and personnel,” says Vance.

Where would such consolidation leave other switch vendors like Trapeze and Meru?

Trapeze, with the sheer amount of money it has garnered from investors, is probably going to be too expensive to buy, thinks Vance. They are partnering now with 3Com, but he doubts the company would look to buy out Trapeze. Mergers and acquisitions these days are too conservative (except in the cellular carrier space, maybe).

Meru, on the other hand—a switch vendor that has long trumpeted its ability to do voice over wireless—might be in a great position if Airespace went to Cisco.

“That leaves lots of unhappy folks—Nortel, Alcatel, NEC—that were using Airespace to provide the wireless portion of their equation. I doubt Cisco would want to continue those relationships. This could be a domino effect for further consolidation… Meru might be a good fit for those companies, with all three having strong voice legacy,” Vance says.

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