The rumours were right: Cisco has signed a deal to buy WiMAX radio vendor, Navini Networks, for $US330 million.

The move gives Cisco an established product line of WiMAX base stations and modems, and 70 existing Navini customers. Cisco plans to incorporate these products, for both fixed and mobile WiMAX, into a package with its Wi-Fi outdoor nodes and mesh gear. The goal, a Cisco executive said, is to create affordable broadband wireless access to telecommunications infrastructures worldwide.

The price tag is $US110 million less than Cisco paid to buy Wi-Fi switch pioneer, Airespace, in 2005, whose products are now the mainstay for Cisco's Wi-Fi offering for both indoor and outdoor wireless LANs, and for the company's dominance of the enterprise WLAN market.

The buy is a milestone and it changes the competitive landscape, senior analyst, networking group, In-Stat, Daryl Schoolar, said.

"First the ITU [International Telecommunications Union] accepts WiMAX as a 3G standard, and now one of the largest networking vendors in the world shows its faith in the technology and in business models behind WiMAX," Schoolar said. "It also creates competitive pressure on other well known players in the market such as Alcatel-Lucent and Nortel. It is one thing for those companies bid against Navini for a large scale deployment, but another thing to go against Cisco."

Cisco benefits with a quick entrance into the market, with an already well-known equipment vendor and early proponent of mobile WiMAX, "where the future of the standard lies," Scholar said. And there's no overlap in the two vendors' product lines, he adds.

Navini's mobile WiMAX focus is a good fit with what Cisco can offer customers. ranging from service providers to enterprises, WiMAX analyst with ABI Research, Phil Solis, said.

"Mobile WiMAX uses a flat IP-based network as transport, which keeps latency low across the entire network, not just the wireless part," he said. "With the WiMAX attach rate in laptops expected to climb very rapidly in the next few years, the wide array of devices that could embed WiMAX, and WiMAX's high data rate and low latency, Cisco realises that WiMAX will play a big part in the overall networking picture."

There's uncertainty if not controversy over just how successful the WiMAX market will be. A recent ABI Research study predicted that by 2012, there will be about 95 million WiMAX CPE subscribers and 200 million mobile devices equipped with the technology. But where the Wi-Fi market was historically a space for small vendors, the WiMAX market today includes giants like Motorola and Nokia.

Cisco clearly hopes for a similar result by acquiring Texas-based Navini. The company was founded by Silicon Valley entrepreneur, Wu-Fu Chen, and radio frequency expert, Guanghan Xu. The company has reaped some $US160 million in venture backing as it developed and brought to market its RipWave MX line of mobile WiMAX base stations, customer premises equipment, and adapters. A particular feature is the company's patented beamforming technology that can shape and direct WiMAX radio waves, boosting range and performance.

WiMAX is a cost-effective access technology to IP backbones, according to vice-president and general manager of Cisco's mobility wireless business unit, Larry Lang. He said the idea for the purchase grew out of Cisco CEO, John Chambers' meetings with carrier and network provider customers, especially in developing countries.

"They want to invest in advanced telecommunications," Lang said. "But putting in next generation infrastructure is one thing. It's another thing to connect to them [from client devices]. In many of these emerging markets, it's impractical to run copper. The answer is radio waves."

Among the flock of well-funded WiMAX startups, Navini offered several attractions, according to Lang. First, the vendor had a full WiMAX product line available. "They have everything they need to build commercial WiMAX nets," he said.

Secondly, it was deep intellectual property portfolio around its "smart beamforming" and MIMO technologies: 13 patents awarded, another 49 pending, according to Lang. Another reason was that Navini already had network deployments (initially of its "pre-WiMAX" radio technology) in such diverse markets as Texas, Nigeria, Bulgaria, and Peru.

Lang wouldn't predict that WiMAX will be Cisco's next billion dollar market. But he said the acquisition gives Cisco an entry into rapidly growing emerging economies.

"WiMAX is a catalyst for the ongoing growth for these emerging markets," he said. "We're seeing 35-45 per cent growth rate in these markets."

In-Stat's Schoolar is unconvinced by one part of Cisco announced strategy, the presumed complementary fit of WiMAX with Wi-Fi mesh.

"I think this is a bad sign for Wi-Fi mesh," Schoolar said. "Cisco has been a significant player in that market as well, and I see WiMAX as a whole negatively impacting the growth of mesh."

The acquisition, in cash and assumed options. The deal is expected to be completed by the end of 2007.