Cisco acquires Starent Networks for $2.9 billion

* Cisco to pay $35 per Starent share, a 20.6 pct premium

* Deal seen hurting non-GAAP earnings in FY 2010, 2011

* Seen adding to FY 2012 non-GAAP earnings

* Starent shares rise 17.1 percent; Cisco up 0.5 pct (Adds deal details, background, stock activity)

NEW YORK, Oct 13 (Reuters) - Cisco Systems Inc (CSCO.O) said it would buy wireless networking gear maker Starent Networks (STAR.O) for $2.9 billion as it sees strong growth in demand for high-speed wireless service.

Cisco said on Tuesday that it would pay $35 a share in cash for Starent. The deal represents a 20.6 percent premium to Monday's closing price for Starent stock, which was up more than 17 percent in morning trading.

The deal shows top U.S. network equipment maker Cisco has stepped up the pace of its acquisitions. It follows the company's Oct. 1 announcement that it plans to buy video conferencing equipment maker Tandberg for $3 billion. [ID:nL1456988]

Cisco said it expected the acquisition to close during the first half of calendar year 2010 and would probably hurt earnings, excluding items, in its 2010 and 2011 fiscal years, but add to profit in fiscal 2012.

Starent, which is based in Tewksbury, Massachusetts, makes network equipment that fits between the radio access network and the core network of mobile phone service providers that include Sprint (S.N) and Verizon Wireless, a joint venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L).

Cisco said there was some overlap in their products, but that their offerings would in most part be complementary.

"We are very pleased that Starent Networks will be joining the Cisco team, and we believe their products and engineering talent will greatly benefit our Service Provider customers as they build out their Mobile Internet offerings," said Cisco Chief Executive Officer John Chambers.

After the deal closes, Starent will become part of Cisco's service provider business, but as a new Mobile Internet Technology Group led by Starent CEO Ashraf Dahod.

Starent shares jumped 17.1 percent to $33.99 on Nasdaq, while Cisco rose 0.5 percent to $23.90. (Reporting by Ritsuko Ando; writing by Franklin Paul; editing by Lisa Von Ahn)

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