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Rumors were flying among several industry sources last week that Cisco Systems Inc. is in serious talks to acquire wireless LAN switch startup Airespace Inc.

The networking giant may pay at least $400 million for Airespace, and a document detailing the terms of the deal is under consideration by the Department of Justice, sources said.

Such a deal would mark a consolidation trend in the maturing WLAN switch space. German networking incumbent Siemens AG bought WLAN switch vendor Chantry Networks Inc. last month. And wireless security company Fortress Technologies last October acquired the technology assets of Legra Systems Inc., another WLAN switch company, which had focused largely on security.

Airflow Networks left the WLAN switch business in April. Cisco chief technology officer Charlie Giancarlo recently told eWEEK that he was looking to acquire security companies; the wireless industry also is buzzing with rumors that Cisco may acquire Airdefense Inc.

“All the various companies in that market are potential acquisition targets,” said Eric Janszen, a venture consultant at Trident Capital in Westport, Conn., and the former CEO of wireless LAN security hardware vendor Bluesocket Inc.

Airespace is one of a handful of companies that remain in the WLAN switch space, which focuses on centralized management of thin access points from a feature-rich switch and companion software.

Other companies in the space include Aruba Wireless Networks Inc. and Trapeze Networks Inc. All three, along with Cisco, have been vying for a major contract to update Microsoft Corp.’s massive campus WLAN, which currently uses Cisco hardware.

Neither Cisco nor Airespace would comment on the acquisition reports, but officials at Aruba said Cisco recently tried to acquire Aruba, and not for the first time. Cisco came very close buying Aruba Wireless Networks more than a year ago, when the WLAN switch industry was still nascent, but ultimately decided to try developing a WLAN switch strategy in-house, according to several industry sources.

When Cisco came calling again recently, Aruba turned down the offer, according to officials at Aruba in Sunnyvale, Calif.

“They approached us a little before Thanksgiving, wanting to discuss potential possibilities,” said Keerti Melkote, co-founder and vice president of product marketing at Aruba.

“We’re always open to partnerships, but they said that they wanted to control the technology. It was an acquisition or nothing. Once you get sucked in by a big player, it stifles innovation. And our vision at the end of the day doesn’t match Cisco’s vision of where the industry is going.”

Cisco’s participation in the WLAN switch space up until now has been a strategy that involves sticking a wireless blade called the Wireless LAN Solutions Module into its Catalyst 6500 networking switch. The company has yet to release a WLSM for any of its other switches.

Click here to read about Cisco strengthening WLAN security.

Cisco’s feature-rich access points are notoriously expensive. The company has considered but has never unveiled a line of thin access points; acquiring a company such as Airespace would provide that.

“It makes a lot of sense,” said Craig Mathias, principal at Farpoint Group, a consultancy in Ashland, Mass. “Clearly Cisco doesn’t have that class of product today. The core issue will be integrating all that [management] software. That will be a big deal, but not impossible.”

Cisco has had an extensive and mixed history of wireless company acquisitions over the past several years. The acquisition of Aironet Wireless Communications—and its access point hardware—in 1999 contributed largely to Cisco’s leadership in the wireless LAN space.

But Cisco’s acquisitions of fixed wireless player Clarity Wireless Corp. in 1998 never went anywhere, and neither did the acquisitions of in-building cellular players JetCell Inc. and Exio Communications Inc. in 2000.

None of the Airespace customers reached by eWEEK last week had heard anything other than rumors of a Cisco acquisition, but they voiced hopes that the Airespace product line would remain intact if a merger happened.

“If Cisco is purchasing them because the technology is better, and if Cisco keeps the technology as is, it wouldn’t mean a whole lot for me,” said Kent Hargrave, CIO at Overlake Hospital Medical Center in Bellevue, Wash. “If Cisco purchased them to squash them, I wouldn’t be too thrilled.”

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