Cisco to buy Starent Networks for $2.9 billion

SAN JOSE -- — Betting on the growing popularity of data-hungry phones such as the iPhone, Cisco Systems Inc. said Tuesday that it had agreed to pay $2.9 billion for Starent Networks Corp., a maker of equipment for wireless carriers.

Starent of Tewksbury, Mass., makes equipment that enables carriers to tie their wireless networks to the Internet.

Cisco of San Jose will pay $35 a share in cash, a 21% premium to Monday’s closing price of $29.03. Starent’s board has accepted the offer, and the companies expect the deal to close early next year.

Starent shares rose $4.88, or 17%, to $33.91. Cisco added 11 cents to $23.89.

Starent will become Cisco’s new Mobile Internet Technology Group, which will be headed by Starent Chief Executive Ashraf Dahod.

Ticonderoga Securities analyst Brian White said Starent has a market share of about 85% in its niche, which includes selling technology to carriers such as Verizon Wireless and Sprint Nextel Corp. that use networks with a technology called code division multiple access.

Sales have grown roughly 65% annually over the last four years.

In the second quarter, Starent earned $15.2 million on $78.3 million in revenue.

It is the second major acquisition in two weeks for Cisco, the world’s largest maker of computer networking gear.

On Oct. 1, the company announced a deal to buy Tandberg, a leading maker of videoconferencing equipment, for $3 billion.