By: Zacks Equity Research

Cisco Systems (CSCO) is planning to buy privately held ClearAccess for an undisclosed amount. The transaction is expected to be completed by the fourth quarter of fiscal 2012.

ClearAccess, a Vancouver company, provides hardware and software for Internet service providers to manage increasingly complex networks for homes and mobile devices.

The acquisition gives Cisco new software that helps service providers manage residential and mobile devices. Cisco intends to add that to 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.

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

Cisco wants a large share of the revenue expected from worldwide Internet traffic within the next few years. The network giant thinks that video-content transfer will make up roughly 90% of total Internet traffic revenue. ClearAccess' cloud and video services will allow Cisco to capitalize on the opportunity. Earlier this month, Cisco also acquired London 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), Hewlett Packard (HPQ) and F5 Networks (FFIV) are gradually picking up market share.

The Zacks rank on Cisco shares is No. 2, implying a "buy" recommendation over the next one to three months.

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