Cisco Acquires Airespace: Shaking Up Enterprise Wi-Fi

Cisco's announced acquisition of Airespace last week for $450 million in stock was the latest of a number of recent moves toward industry consolidation. But it should also be one

Dave Molta

January 26, 2005

2 Min Read
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It will be interesting to see what kind of pricing model Cisco decideson for this new "smart-everywhere" architecture. The company hashistorically charged a significant premium for its well-engineered APs.Vendors like Airespace, Aruba, Trapeze and Symbol have priced their APsas giveaways, making most of their profits on high-priced networkcontrollers and software. The combination of premium-priced APs andhigh-cost controllers could force IT managers to modify their financialmodels for rolling wireless out enterprisewide. They won't want to dothis, so Cisco will feel some pressure to lower prices.

Market forces will also play a key role in future system pricing. Beforethis acquisition, Cisco was already the dominant force in enterpriseWi-Fi, and many pundits have long proclaimed it "their market to lose."While Cisco's near-50-percent enterprise wireless market share makes itthe clear leader, much of that market was soft--so soft that a number ofhigh-profile, loyal Cisco Ethernet customers (Microsoft is rumored to beamongst them) were jumping ship for wireless solutions from Airespace,Aruba, Trapeze and others. One senior IT architect from a majorfinancial services company and a large Cisco customer told me that hefelt Airespace had acquired the position of thought leadership in theenterprise Wi-Fi market. Ouch.

Now those "on-the-fence" customers are much more likely to remain loyalto Cisco for wireless. Aruba is now elevated to the mantle of "mostcredible alternative to Cisco" in the enterprise, because of both itstechnical innovations and its market success. When I recently askedAruba co-founder and VP of marketing Kerrti Melkote what percentage ofthe 200-plus enterprise customers they touted were Cisco shops, hisresponse was "almost all of them." Now, when Aruba competes in Ciscoshops, it will compete against Cisco's name and Airespace's marketingand technology. That will be tough.

There is reason to wish success upon Aruba, Trapeze, Symbol, Meru,Proxim, Colubris, Nortel, 3Com, Extreme and any other competitivealternatives to Cisco. Cisco, which has a record of working outside theIEEE to define its own proprietary standards (LEAP for security, CCX formore advanced capabilities), needs competition, not only to keep ithonestly engaged in industry standards efforts but also to encouragecontinued innovation. A fat, happy Cisco could be bad news for everyone.Dave Molta is Network Computing's senior technology editor. Write to him at [email protected]

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