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Cisco Systems Inc. (CSCO - Analyst Report) announced its plan to buy privately held ClearAccess for an undisclosed amount. The transaction is expected to be completed by the fourth quarter of fiscal 2012, pending customary closing conditions.

Vancouver-based ClearAccess provides both hardware and software for Internet service providers to manage increasingly complex networks for homes and mobile devices.

The newly acquired products from the ClearAccess acquisition include TR-069-based software that helps service providers to manage residential and mobile devices. Cisco intends to blend TR-069-based product with Cisco Prime, its network management software portfolio. The acquisition will improve Cisco’s software capabilities for service providers, thereby improving operational efficiencies and customer experiences.

However, the hardware portion of the ClearAccess, called Smart RG Gateways, will remain an independent company called SmartRG Inc.

Cisco is eyeing to capture a large share in the expected revenue to be generated by worldwide internet traffic within the next few years. The network giant assessed that contribution from video content transfer would be roughly 90.0% of the total internet traffic revenue. ClearAccess’ cloud and video services will allow Cisco to capitalize the opportuinity. Earlier this month, Cisco also acquired London-based video communications company NDS for $4 billion to bolster its video strategy.

Cisco Systems is a leading provider of IP-based networking and other products. Although Cisco is taking steps to lower its cost structure by reducing headcount, it is not ignoring growth opportunities.

Cisco is no doubt the networking leader, but competitors like Juniper Networks (JNPR - Analyst Report), Hewlett Packard Company (HPQ - Analyst Report) and F5 Networks (FFIV - Snapshot Report) are gradually picking up market share.

The Zacks Rank on Cisco shares is #2, implying a Buy recommendation over the next 1-3 months.

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