Cisco taps into social-networking trend

Cisco Systems is making its first move toward courting big media companies with the acquisition of a small social-networking company.

The company is set to announce it's buying Five Across, an 11-person company based in San Francisco which has developed software that allows large companies to easily add social-networking features to their websites without needing to hire a team of engineers to do it. Using this tool, companies will be able to add communities so users can share audio, video and photos, as well as post blogs, podcasts and profiles.

Cisco has not disclosed the terms of the deal, which is expected to close in the third quarter of Cisco's fiscal year 2007 - which ends on 28 April.

While at first blush it seems odd that Cisco, a company which sells hardware to shuttle bits around the internet, would buy a software-based, social-networking business, analysts following the company say it actually fits in well with Cisco's long-term strategy.

Danielle Levitas, senior analyst and vice president for IDC, said: "Social networking is all about attracting more eyeballs. And it's interactive in nature, so people are downloading and uploading pictures and video. They are streaming media. It drives a lot of traffic on the network, which causes a need for more capacity. And Cisco is the company that provides all that infrastructure."

For more than a year, Cisco has been implementing a strategy to broaden its product portfolio beyond simply being the "plumbers of the internet". The company has been aggressively pushing into new markets that are more consumer focused, such as video, home networking and even consumer electronics.

Late last year, it created the Media Solutions business unit, which develops and markets products to digital media content owners. The head of the group, Dan Scheinman, has said the next step for it is to work more closely with the companies that are creating the movies, TV shows, music and other multimedia content that ends up in consumers' homes.

Cisco executives say this acquisition is likely to lay the cornerstone of its digital media strategy, because social networking is an important way people connect with and discover content. This will become critical for big media companies, such as the movie studios and television networks, as they continue to move their content onto the internet.

Marguerite Reardon writes for CNET News.com