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Cisco Buys Israeli Software Maker

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Tuesday, January 29th, 2013

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As reported in Globes: Ra’anana-based Intucell develops self-optimizing network software for planning and managing mobile networks.

Cisco Systems Inc. (Nasdaq: CSCO) has announced that it will acquire advanced self-optimizing network (SON) software developer Intucell Ltd. for $475 million in cash. Intucell’s solution enables mobile carriers to automatically plan, configure, manage, optimize and heal cellular networks in line with real-time changes in network demands.

Headquartered in Ra’anana, Intucell has offices in the UK, US, and Singapore. Founded in 2008 by CEO Rani Wellingstein and VP products Ido Susan, who can each expect to earn around $80 million from the sale, investors include Bessemer Partners and private individuals. Genesis Partners gave the company a loan in 2010. In total, Intucell has raised only $7 million according to IVC. Cisco will integrate Intucell’s 800 employees into its Service Provider Mobility Group, which reports to Cisco VP and general manager Software and Applications Group Shailesh Shukla. Cisco said that part of the acquisition includes “retention-based incentives”.

Cisco said, “The proliferation of connected mobile devices, faster network speeds, and growing demand for high-bandwidth applications and services are driving greater network traffic and complexity. As mobile service providers continue to face increased end-user demand, the need to optimize network bandwidth, usage and services is increasing. Intucell’s SON software platform addresses these challenges by examining the network, identifying issues in real time, and intelligently adapting the network to meet demand.”

Cisco adds that, with the evolution of 4G LTE networks, Intucell’s solutions will help it provide next-generation solutions with a SON software platform that supports multi-application, multi-vendor and multi-technology capabilities and enables service providers to manage operational costs and make better use of infrastructure investments.

Cisco Systems Inc. agreed to buy Israeli software maker Intucell for $475 million in cash plus retention-based incentives, as the technology heavyweight looks to address the challenges brought about by increased mobile-network traffic.

The deal, expected to close in Cisco’s fiscal third quarter, would continue a string of software acquisitions by the San Jose, Calif., company, which aims to double the share of revenue it gets from software in the next five years. Nine of the company’s last 10 deals were related to software or services, according to an analysis by RBC Capital Markets.

Based in Ra’anana, Israel, Intucell provides software that helps mobile-network carriers plan, configure and manage cellular networks automatically. Its technology helps manage congestion that has become endemic in many networks as consumer demand for mobile bandwidth outpaces many carriers’ ability to accommodate them.

AT&T Inc. last year began deploying the company’s technology in U.S. field trials and found it improved calls’ reliability in overloaded areas.

“The mobile network of the future must be able to scale intelligently to address growing and often-unpredictable traffic patterns, while also enabling carriers to generate incremental revenue streams,” said Kelly Ahuja, general manager of Cisco’s Service Provider Mobility Group.

Cisco is one of the most prolific buyers of venture capital-backed startups. The Intucell deal will deliver strong returns to Bessemer Venture Partners, which invested $6 million in Intucell in January 2011. That investment gave the venture firm about half of Intucell, a stake that is now worth roughly $230 million in this deal, according to a person familiar with the firm’s investment.

Bessemer, which ranked among the busiest venture-capital firms last year, played a key role in connecting Intucell with AT&T, the person familiar with the deal said. Bessemer Partner Bob Goodman, a longtime telecom executive who joined the Intucell board, introduced the company to AT&T, the person said, and AT&T agreed to a $50 million contract. That helped spur Intucell’s growth from six employees to 85 people at today’s deal.

Cisco’s shares slipped 12 cents to $20.75 early Wednesday. Its stock has climbed 25% since mid-November.