Cisco to buy Navini for $330M

Cisco Systems announced last week that it will acquire WiMAX networking equipment developer Navini Networks for $330 million, delivering a less-than-stellar payback to venture backers, who have poured $195 million into the Richardson, Texas-based company.

Cisco said the planned purchase will likely close in the second quarter of next year. It will be acquisition No. 124 for the networking giant.

For Navini, the exit has been a long time in the making. The company raised its first round, of $15.5 million, in 2000, with backing from Sequoia Capital and Austin Ventures. It then raised $180 million over nine more rounds in the next six years, drawing capital from such investors as Arcapita Ventures, Austin Ventures, Sternhill Partners, Lehman Brothers, TI Ventures, Intel Capital, Motorola Ventures, Granite Ventures and Investor Growth Capital.

Cisco’s stepped-up WiMAX activity should also spur growth. CIBC analysts Ittai Kidron and Glen Anderson, commenting on Cisco’s latest acquisition, called the deal “a strong endorsement to WiMAX as a technology” and estimated Navini’s annual sales at about $80 million. However, Cisco’s move into the WiMAX arena also raises the competitive bar against established players, including Motorola, Nortel, Nokia, Siemens and Alvarion.

Navini is one of a handful of WiMAX companies that have raised substantial venture funding to date, including new rounds this year. Aperto Networks, a Milpitas, Calif.-based developer of WiMAX base stations, has raised $145 million since 1999, including $21 million in the past year from Canaan Partners and Labrador Ventures, among other investors. Beceem Communications Inc., a Santa Clara, Calif.-based developer of wireless broadband semiconductor technology, has raised $109 million in the last four years, including a $26.5 million round in February from Sequoia Capital, Intel Capital, Khosla Ventures and other investors.

And Telsima Corp., in Sunnyvale, Calif., raised $50 million in April from NewPath Ventures, JAFCO, New Enterprise Associates and CMEA Ventures. The company, which develops technology for delivering rich media over WiMAX, has now raised more than $78 million since its launch in 2004, according to Thomson Financial (publisher of PE Week).

However, the biggest WiMAX play to date has been network operator Clearwire Corp. (Nasdaq: CLWR), which has a market capitalization of about $3.6 billion nearly eight months after its $600 million IPO. The stock of Clearwire, which was trading at about $21 a share last week, is down sharply from its $35 peak in July. But analysts project that Clearwire’s annual revenue will more than double in 2008 as WiMAX gains traction. ABI Research forecasts that by 2012, just under 300 million people will connect to WiMAX.