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Cisco Systems is expanding its video expertise with yet another acquisition.

The maker of networking gear said Tuesday that it plans to buy Denmark-based DiviTech, marking its 128th acquisition.

DiviTech has developed software that allows media broadcasters, as well as cable and Internet Protocol television service providers to provision local programming and content, such as regional news and on-demand video service, for specific geographic areas.

Cisco said in a statement that it plans to integrate the DiviTech technology into its existing product line, which includes products gained from the Scientific-Atlanta, Arroyo Video Solutions, and Tivella acquisitions.

Financial details of the transaction weren't disclosed.

Cisco expects the acquisition to close in its fiscal fourth quarter, which ends in July. After the acquisition is complete, DiviTech will be integrated into Cisco's Digital Media business unit, and the start-up's employees will move into Cisco's Copenhagen offices.

For the longest time, networks were built in three tiers: access, aggregation, and core.

This made a lot of sense back in the old days because of network technology limitations and traffic patterns. But alas, network usage and technology have radically changed since then. Network packets carry all sorts of traffic consisting of chatty protocols, voice, and multimedia. As for networking technology, many historical limitations are fading away. Today's networking devices have superior capabilities in four key areas:

1. Wireless support
The new 802.11n IEEE standard is a game changer that may eliminate the need for most wired connections.

2. Port density
A 24-port access switch can join others in a stackable or virtual configuration. The result? Tons of ports for connectivity.

3. Performance
Networking equipment combines 10-gigabit Ethernet with incredibly fast system backplanes.

4. Intelligence
Devices can easily combine Layer 2 switching, Layer 3 routing, and a host of other packet processing capabilities.

Over time, these device-centric changes could alter the way we build networks and greatly impact the networking industry. Packet processing and forwarding decisions will be made throughout the network, not at specific aggregation points alone. As this happens, the network could morph into an intelligent flat fabric rather than today's hierarchical structure.

No, this won't happen overnight, but the roots are already being planted. Hewlett-Packard has been talking this game for a while and is rapidly becoming a major networking player. Juniper Networks' entrance into the Ethernet switching market will also accelerate the model. As for Cisco Systems, it has the most to lose but is adjusting its game accordingly. John Chambers & Co. may not want a flat network, but they understand that technology advances are pushing the network in this direction.

Network equipment maker Cisco Systems introduced a simpler, cheaper version of its high-end video conferencing system on Monday.

The new Telepresence System 500 is a less expensive version of the telepresence product Cisco launched in 2006. Cisco's telepresence system was developed using high-definition screens and cameras, array speakers, and high-speed Internet connections to provide crystal clear video conferences that could replace the need for executives to travel halfway around the world to meet with colleagues, partners, or customers. The idea is that if companies can conduct business virtually they can save a whole lot of money on traveling.

Cisco TelePresence 500

(Credit: Cisco Systems)

Video conferencing has become a big part of Cisco's strategy moving forward. Last year, the company acquired online video and audio conferencing company WebEx. While WebEx allows for video conferences to be launched straight from the desktop, it's not meant to replicate in-person meetings. Still, it fits into Cisco's overall strategy, which is to improve worker productivity by allowing people in different locations to collaborate using the Internet.

The original version of the telepresence product was developed for small groups. It requires an entire room be dedicated to setting up the system, and it is expensive. The latest version of the product is expected to appeal to a broader audience and is designed to be used by one person.

The TelePresence System 500 integrates a 37-inch display, camera, microphone array, speakers, and specially designed lighting in a unit that can be placed on a desk, mounted on the wall, or stood on a pedestal in a private office. It will cost $33,900, which is less than half the cost of the most basic version of the TelePresence 1000, which was designed for about two people to a unit.

In addition to taking telepresence down to the personal level, Cisco introduced a version of the product that can accommodate larger groups of people. The Cisco TelePresence 3200 is designed for up to 18 people and is a step up from the TelePresence 3000, which was designed for six people. The 3200 version will cost $340,000, compared with $299,000 for the 3000.

Cisco TelePresence 3200

(Credit: Cisco Systems)

The company said the new Cisco TelePresence 3200 is ideal for company headquarters or large regional offices where large teams need to collaborate. It also is good for remote training.

Cisco has had good success with its TelePresence offering so far. And last month Cisco said it was teaming up with AT&T to jointly sell its telepresence products.

Cisco competes with a slew of companies in this market, including Hewlett-Packard, Polycom, and Teliris. Verizon Business, a unit of Verizon Communications, also sells a video conferencing service.

On Monday, Teliris announced a product designed for "personal" telepresence. Its product lists for $32,500. It also introduced a version for larger groups, which includes two or three screens. It costs between $99,000 and $125,000 and does not require a separate room dedicated to the system.

The FBI announced Friday that an investigation into counterfeit network components made in China and sold to the U.S. government has recovered about 3,500 fake devices with a value of $3.5 million.

The criminal probe, code-named Operation Cisco Raider, was prompted by concerns that counterfeit network components could give hackers access to government databases. But one U.S. official told Reuters that the components discovered by the FBI are not believed to have made government computer systems more vulnerable.

The existence of the probe came to light after an unclassified FBI PowerPoint presentation in January on the agency's efforts to counter the production and distribution of counterfeit network hardware showed up on Abovetopsecret.com.

"This unclassified briefing was never intended for broad distribution or posting to the Internet," James Finch, assistant director of the FBI's Cyber Division, said in a statement.

Operation Cisco Raider involved 15 investigations at nine FBI field offices and the execution of 39 search warrants, the bureau said. The FBI release did not mention whether any arrests had been made.

Components included pirated versions of Cisco Systems routers, as well as switches, interface converters, and wide area network interface cards, Reuters reported.

Network equipment maker Cisco Systems beat analyst expectations when it reported earnings Tuesday, but its lukewarm guidance showed that the slowing U.S. economy is still impacting the company.

Cisco, the world's largest supplier of equipment that shuttles traffic around the Internet, reported a net profit for the fiscal quarter of 2008 of $1.8 billion. This was down from profits of $1.9 billion in the same quarter a year ago, but it still beat analyst expectations.

Revenue for the quarter was up 10.4 percent to $9.8 billion. The company had forecast an increase in revenue of 10 percent.

Analysts believe that Cisco's results mean the company's business is stabilizing. But the sagging economy will still continue to impact its earnings for the next few quarters.

Last quarter, CEO John Chambers said the company was seeing a slowdown in technology spending in Europe and the U.S. And he predicted it would take two to five quarters for things to rebound.

On Tuesday's conference call, Chambers said that spending in the U.S. is still tight. And he anticipated that budgets will be constrained through at least the next two quarters. He said the company will likely see sales growth in the 9 percent to 10 percent range in the quarter that ends in July. But he maintained that the company's long term forecast of 12 percent to 17 percent revenue growth is still doable, indicating that he thinks the slump will be short-lived.

A correction was made to this story. Read below for details.

Foot traffic seems slow at this year's Interop business tech conference. I've heard about companies issuing travel bans on employees and vendors pulling out at the last minute due to budget constraints. However, the people who run Interop say attendance is up from last year.

Nevertheless, the networking industry is making the best out of it. Some of the early highlights for me include:

1. Switching, switching, and more switching
Extreme Networks kicked off the proceedings on Monday in Las Vegas with a new 10-Gigabit stackable data center switch built to scale to 40/100 Gig in the future. This nice device set the tone for Interop 2008. On the show floor, start-up Arastra received its fair share of Vegas buzz. The company was founded by former Sun Microsystems bigwig Andy Bechtolsheim, but the real story here is that Arastra is pushing the 10-Gigabit Ethernet performance limit with prices at around $500 per port. It will be tough for old Andy to crack this market with the big boys, but this is pretty impressive.

2. Don't forget Cisco
Is Cisco Systems vulnerable in the data center switching or other networking spaces? Probably not. Senior Vice President Jayshree Ullal's team won the "best of Interop" award for Cisco's new Nexus data center switches and picked up another award for application acceleration.

3. Virtualization
I am intrigued by Citrix Systems' strategy that blends server/desktop virtualization with its leading XenApp (formerly Presentation Server) and NetScaler application acceleration portfolios. Citrix is thinking about virtualization, asset optimization, and traffic management from end-to-end. This is where the industry is headed; Citrix has a pretty good idea of how to get there.

4. Nortel gets the chutzpah award
Nortel Networks is on the offensive and its target is--obviously--Cisco. Nortel announced 60 companies that chose it over Cisco, a pretty bold gesture on Nortel's part. Nortel is also featuring an "energy calculator" at its booth where users can enter a Cisco and Nortel configuration and get data on power consumption comparisons. No gimmicky booth babes or giveaways, just "go for the throat" guerrilla marketing.

On tap Wednesday: more virtualization and wireless networking. Should be fun.

Correction: This story initially said attendance at Interop was down. Attendance at the show was actually up from last year.

On Monday, Blue Coat Systems bought competitor Packeteer to bolster its position in the WAN acceleration market. This move was probably motivated by two objectives.

First, while Blue Coat grew up in Web caching, Packeteer's strength has always been deep packet and protocol expertise. The two technologies complement each other quite well, covering the gamut from application to file access acceleration.

The other thing Blue Coat gets is scale; competing with Riverbed and Cisco Systems demands deep pockets and feet on the street. Blue Coat gets bigger instantly. All in all, it's good for Blue Coat, bad for second-tier WAN optimization folks.

On another note, I want to issue a mea culpa to the folks who run the RSA Security Conference. In a blog last week, I relayed the multitude of complaints I heard from exhibitors about the prices they had to pay for things like cases of water, chairs, and tables. My blog may have inferred that the RSA Conference organizers were responsible for this highway robbery, but that is not the case. Actually, RSA only passes on the costs demanded by the Moscone Center, so the extortion lies with the venue and not the show itself. I apologize to the RSA Conference management team for the confusion.

Cisco Systems said Monday that it's added to its arsenal of data center technology with a new switch and the purchase of start-up Nuova Systems.

Cisco, which already owned 80 percent of Nuova, worked with the start-up to build the new Nexus 5000. On Monday, Cisco introduced the new switch, and also announced that it has bought the remaining 20 percent of the start-up.

Cisco announced its $70 million investment in Nuova in 2006. The company didn't disclose details of the current buyout. But in April of last year, it expanded its funding agreement and raised the maximum potential payout of the transaction to $678 million.

Cisco will continue to use the Nuova technology to further develop and expand the Nexus product line, a new line of data center switches the company introduced earlier this year. The first product in the line was the Nexus 7000. The Nexus 5000 will provide a smaller, fixed version of the product.

The new Nexus switches combine Ethernet switching, IP routing, storage, and security into a single device. And while these switches don't necessarily take over the functions of servers or storage area devices in the data center, they will allow companies to use their servers and storage devices more efficiently.

Cisco has spent more than two decades building its brand as a switching and routing powerhouse. Now, it is tackling the data center, where it hopes its Nexus products will dominate. These new switches are expected to become the next high-ticket item Cisco can sell to large companies to help fuel the company's growth. Cisco hopes the data center will be worth about $10 billion over the next five years, which means it is a key opportunity for a company that needs to grow at least between 10 percent and 15 percent a year to satisfy Wall Street.

But Cisco's move into the data center could pit it against some of its largest partners, such as IBM, Hewlett-Packard, and EMC. Cisco claims its products complement products from these companies. IBM and Hewlett-Packard are more server-centric. And EMC is more focused on the issue from a storage angle. Meanwhile, Cisco sees the intelligent network, with its Nexus 7000 sitting in the center, as the best answer for virtualizing the data center.

Still, competing with its partners is starting to become a familiar tune at Cisco, which has found itself also competing head-to-head with software giant Microsoft in some areas of its business.

A recent libel lawsuit filed against Cisco Systems over one of its employees' personal blogs could spur companies, many of which have encouraged workers to share their writings publicly, to reconsider how much latitude to give them.

Thousands of companies have embraced the idea of giving employees an unfiltered voice as a means to keep in touch with customers, suppliers, and the media. Sun Microsystems boasts a 4,000-employee-strong blog network, including its chief executive, and some corporate "spokesbloggers" like Microsoft's Robert Scoble have even rocketed to Internet stardom.

Cisco's legal trouble stems from a Blogspot-hosted blog called Patent Troll Tracker, which Rick Frenkel, who directs the company's intellectual property department, launched last May. His posts focused on patents and patent litigation--an issue that Cisco has pressed Congress to address by overhauling what it views as a broken U.S. patent system.

A few weeks ago, Frenkel revealed his identity, and two patent attorneys in Texas filed suit, accusing him of tarnishing their good names and disparaging a patent case their client had filed against Cisco--all the while allegedly concealing his affiliation with the company.

Cisco has responded by rethinking how it does blogging. Now the Patent Troll Tracker posts appear to be open only to invited readers. Although the company says it's standing by Frenkel and allowing him to continue his personal blog, the incident also highlighted a number of important "lessons," Cisco said in a statement--including the potential perils of unchecked anonymous blogging.

Cisco said it still believes "common sense" should be a guiding force for employees sharing information online, but it also added the following rule to its three-year-old Internet postings policy: "If you comment on any aspect of the company's business or any policy issue the company is involved in where you have responsibility for Cisco's engagement, you must clearly identify yourself as a Cisco employee in your postings or blog site(s) and include a disclaimer that the views are your own and not those of Cisco."

Although it wasn't a surprising move, it also may discourage other employees, said Denise Howell, an intellectual property and technology lawyer based in Newport Beach, Calif., who has written about corporate blogging policies.

"It helps show what expectations are for the company," she said, "but it's telling everyone else, 'Gee, we think you're just as big a risk as this guy.'"

Sun Microsystems, Yahoo, Google, Dell weigh in
To be sure, it's still the exception, not the rule, for companies to have rules governing blogging in the first place. But among those who do, not all of them make it absolutely mandatory to disclose one's corporate affiliation.

Sun Microsystems, which hosts blogs from CEO Jonathan Schwartz and some 4,000 other employees, has had a blogging policy in place since 2004. It broadly prohibits discussing a wealth of "non-public" information, including financial data, code, personal information about other individuals, all manner of confidential information, and "work-related legal proceedings or controversies." (Click for PDF)

But unlike Cisco, Sun doesn't require bloggers to disclose that they work for the company, although Tim Bray, the company's Web technologies director, says he considers doing so "good practice."

Google similarly recommends, but does not require, such disclosures, said spokeswoman Sunny Gettinger. (Google said it has an internal "communications" policy but doesn't make it public, although its general employee code of conduct is.)

Yahoo is arguably even gentler, but its policy has "been successful in providing employees with guidance on blogging practices with respect to the company," said spokeswoman Nicki Dugan. Its guidelines, issued in 2005 (PDF), decree two main rules: don't reveal proprietary information, and be cautious about posting exaggerations, obscenities, or other characterizations that could invite litigation.

Under a separate list of not-mandatory guidelines, Yahoo employees who choose to identify themselves as employees of the company are told to consider telling their supervisors, but they're not required to do so, nor are they required to disclose that they work for Yahoo at all.

"If you're worried about what your mom, manager, ex-coworker, or Terry Semel would think, listen to that instinct," Jeremy Zawodny, one of Yahoo's best-known employee bloggers, wrote in a May 2005 blog post introducing the policy.

The BBC's blogging guidance actually carves out "blogs or Web sites which do not identify the blogger as a BBC employee, do not discuss the BBC, and are purely about personal matters" from its guidance.

Dell's stance is perhaps the most similar to--and predates--Cisco's. Bob Pearson, the computer maker's vice president of communities and conversations, said the company prides itself on being one of the first companies to release a "clear transparency policy."

That "online communication policy," released in November 2006, sets standards for employees when they're acting as "a delegate of the company."

Specifically, they're expected to disclose their association with Dell whenever they do any sort of blogging, social networking, Wikipedia entry-editing, or other online activities related to or on behalf of the company. If the subject matter crosses over into hobbies or people's personal lives, "there would be no rationale for us to get involved in that," Pearson said in a phone interview Tuesday.

Translation: "If someone is a fisherman and they want to talk about fly fishing outside of work, then that's not our business, it's personal," said Pearson. "But if someone is going to talk about notebooks and anything related to Dell, they have to say they're from Dell."

IBM also requires its employees to identify themselves and their roles with the company if they're blogging about company-related topics. Its lengthy guidelines began through a wiki process in spring 2005 and have been evolving since then.

Other companies were less forthcoming about what rules, if any, they have in place.

Apple and Symantec spokespeople declined to comment on whether they have employee-blogging policies and what they entail. An Adobe spokeswoman said the company "does have an active blogging community and asks those participating to adhere to Adobe's blogging guidelines," but she declined to share those rules. A McAfee representative said the company is in the process of "refreshing" its blogging guidelines--for undisclosed reasons unrelated to the Cisco incident--but declined to share any details about what's in place now.

Microsoft offers employees a list of frequently asked questions about how to apply existing company policies on confidentiality and other matters to the blogging world, but it doesn't make that public, a spokeswoman said. The gist of the guidance, though, is to be smart and use common sense, she said.

Any company that decides to adopt blogging policies should keep them short, clear, and to-the-point, said Howell, the online communications lawyer.

"I don't think you need to necessarily try to take into account every single specific situation that might come up in your blogging policy," she said. "You'll come up with something that's unreadable and draconian. No one will actually read it or respect it."

Cisco Systems CEO John Chambers is joining the virtual stage with Nobel laureate and former Vice President Al Gore on Wednesday morning to talk about climate change and technology innovation.

Al Gore

Chambers and Gore will use Cisco's telepresence system to communicate with a live audience at the VoiceCon trade show in in Orlando, Fla. They will discuss how unified communications technology, like the telepresence platform, can play a role in reducing carbon emissions, which are impacting climate change.

John Chambers

They'll also discuss other ideas for how businesses can reduce greenhouse gas emissions through innovative technologies and how the technology industry can create a sustainable model for addressing climate change.

The event will be Webcast live starting at 11 a.m. EDT/8 a.m. PDT. And anyone interested in tuning in can register at the Cisco Web site to sign up in advance.

My colleague Martin LaMonica, who covers green technology, will be listening to the Webcast. So look for a blog post from him later Wednesday.