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Belkin buys Linksys from Cisco

Tie-up means Cisco's not entirely free of low-end business

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Cisco has found a buyer for its unwanted and unstrategic Linksys low-end networking brand, in the form of accessories and small networks player Belkin.

Both companies have issued gushing notifications of the deal, but haven't let it be known how much cash or other fungible instruments will change hands to make it happen. It's therefore impossible to know whether Cisco has recovered the $US500m it spent on Linksys back in 2003.

Perhaps the most interesting piece of information in the announcement is Belkin's statement that the deal will result in an ongoing entanglement between the two companies.

“Belkin and Cisco intend to develop a strategic relationship on a variety of initiatives including retail distribution, strategic marketing and products for the service provider market,” Belkin's press release says.

Those initiatives are not explained, but the relationships the companies have with service providers may hold the key. Service providers – aka internet service providers – are a desirable class of customer; they shift lots of units and also they like synergies between the endpoint devices they send to customers and their core networks, where more substantial Cisco kit may reside. Cisco would surely be loath to give such customers a reason to stop talking to it, or make their lives any more difficult.

Belkin feels it emerges from the deal in a position of strength, claiming it will have 30 per cent of the US retail home and small business networking market.

The Linksys brand will live on, and Belkin will honour all warranties and take on support for Linksys products.

Belkin CEO Chet Pipkin declared himself “very excited about this announcement”.

Cisco's Hilton Romanski says he is “confident that we have found the best buyer in Belkin.”

Belkin is privately held so it is hard to gauge market reaction to the deal, but Cisco shares were nearly two percent higher at the end of Thursday trading. ®

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