Navini Networks is now the hot favorite to become Cisco’s first WiMAX acquisition, with the larger company widely expected by the financial community to close a deal within weeks. The start-up, which specializes in combining MIMO smart antenna arrays and beamforming technology to boost mobile WiMAX performance, would fit a common pattern of Cisco purchases ‘ a small player with advanced technology that Cisco could commercialize rapidly, giving itself a technological headstart, but with only a small legacy customer base to assimilate and support.
This last point would seem to be one strike against another rumoured candidate, Israel’s Alvarion, which is the market leader in broadband wireless access, and which some analysts believe would be a better choice than Navini. Although Alvarion and Cisco have been working increasingly closely together, and Alvarion is well placed among mid-tier operators, it would cost more than Navini ‘ about $1bn compared to the $200m-$230m that ThinkEquity Partners estimated, in a recent research note, would be the tag for Navini. And more importantly to Cisco, it has a substantial proprietary customer base to be supported.
Most of the thinking around the Alvarion rumors focus on Cisco trying to create a new revenue stream using readymade channels and products, and repeating the trick it pulled with the purchase of Airespace in enterprise Wi-Fi. However, none of the WiMAX start-ups is in the early and dominant market position Airespace was in at the time of acquisition, and Cisco would be drawn into competition with carrier class giants in a sector that is far more complex, and more alien to its own strengths as a box shifter, than Wi-Fi switches.
By contrast, Navini brings a technology play, including several smart beamforming patents, that could be adapted to other products too. The Texas company has raised around $160m in financing since its founding in 2000 and has been looking for additional equity financing this year, according to wireless news service Unstrung and ThinkEquity.
However, some financial analysts think Alvarion would be a more tried and tested option. Zack Miller of Profile Investments likes the Israeli company because of its installed base and early release of pre-certified 802.16e base stations. He wrote: “CSCO seems to be making a technology bet if they scoop up Navini ‘ a move that will give them a strong, but not dominating presence in WiMAX. I’d rather put my chips on ALVR, and its business and financial operating history, complete with cash on the books, and no debt.”
Alvarion currently has market capitalization of under $800M with a net-cash position of almost $2/share and is close to break even.