Cisco continues Web 2.0 buying spree, gobbles Reactivity for $135M

Cisco Systems, the San Jose Internet backbone company digging deep into its pockets to acquire Web-related companies, has agreed to acquire Reactivity for $135 million. The purchase will allow Cisco to integrate its networking operations more closely with Web applications.

Reactivity provides so-called XML gateway technology, which is placed in a layer of the Internet network that talks with Web applications. Reactivity has built things like XML firewalls, but will also help wireless and other carriers as they roll out more Web services with interactive features for consumers. Indeed, Cisco says the rise of Web 2.0 like companies was a driver behind the acquisition:

….customers are deploying a variety of Web 2.0 capabilities that are collectively transforming the World Wide Web from a collection of relatively static web sites to a services rich computing platform. XML- and Simple Object Access Protocol (SOAP)-based web services are becoming the de facto communications and information exchange standard for this new model of applications. Reactivity’s industry leading XML gateways enable customers to efficiently deploy, secure, and accelerate XML and web services.

The pace of Cisco acquisitions remains robust. Already this year, it has bought Five Across (for a reported $25-$30M) and Ironport Systems. And these follow Cisco’s considerable efforts to move into your living room, with acquisitions of companies like wireless router company Linksys and set-top maker, Scientific-Atlanta. Now you know why Cisco’s Ned Hooper has crept onto the Midas List.

Finally, a note on the investors who win on this deal. Venture Capitalists invested about $51 million $31 million (we’re told some capital had been given back) into Reactivity since 2000, so the deal probably meant a decent profit for most of them. Again, venture firm Accel Partners showed its staying power, backing Reactivity during 2000, at a relatively high valuation (we’re told about $52 million), and then staying with it even after the Internet bubble burst and Reactivity’s value was slashed to $14 million. It’s good to have backers who stay the course. Other investors were Austin Ventures and Diamondhead.