Cisco Acquires Social Networking Company

Cisco Systems Inc., whose core business is selling the routers and switches that direct data traffic over computer networks, said it has acquired a small social networking company that allows businesses to create MySpace-like communities on their Web sites.

Cisco said Friday that it was paying an undisclosed amount to acquire privately held Five Across Inc., an 11-person San Francisco company whose software allows companies to add user-interaction functions and multimedia-sharing capabilities to their Web sites.

Five Across' publishing platform allows users to create personal Web pages and post photos, videos and audio clips, much like the proprietary system used by News Corp.'s MySpace.

Cisco said the acquisition, its 116th since 1993, is the company's first in the social networking space but likely not the last. The deal is expected to close within the current fiscal quarter.

Analysts said the acquisition helps further Cisco's expansion beyond its role as purely a network equipment provider and into helping distribute the media that drives bandwidth consumption and even more network upgrades.

Danielle Levitas, a senior analyst at market researcher IDC, said the Five Across acquisition could help Cisco win greater access to a wide range of companies, particularly those in media and entertainment, looking to upgrade their Web sites to connect with customers.

"I actually see this as benefiting their core business -- if they can promote users using their broadband more, that's huge for them," Levitas said.

Cisco has profited mightily in recent quarters from surging sales of its routers and switches as service providers and other companies scramble to upgrade their networks to prepare for the next generation of video and other bandwidth-intensive downloads.

Cisco, which was sitting on nearly $21 billion in cash at the end of the second quarter, has been rapidly expanding by acquiring companies that capitalize on the products and services that utilize the network itself.

The company's largest recent acquisition was its $6.9 billion purchase last year of Scientific-Atlanta Inc., the world's second-largest cable television box seller.

Last month, Cisco also announced it was paying $830 million in cash and stock to acquire IronPort Systems Inc., a maker of anti-spam and antivirus security products. That deal is also expected to close in the current quarter.

Investors have cheered the San Jose-based company's robust earnings growth, sending its shares up 45 percent from a year ago and creating more than $51 billion in additional shareholder wealth.

Cisco's stock closed up 5 cents to $28.14 on Thursday before the acquisition was announced.


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