Cisco Buys Stake In San Francisco Smart-Grid Company

By Andrew Morse, Of DOW JONES NEWSWIRES

SAN FRANCISCO (Dow Jones)-Cisco Systems Inc. (CSCO) has bought a stake in a privately-held smart grid company, marking the networking giant's first investment in a technology it sees as being part of its future growth.

Cisco purchased a stake in Grid Net Inc., a San Francisco-based maker of software used to digitally manage the transmission of electricity over power grids. Grid Net also makes software used in smart meters, displays placed in homes that allow people to use electricity when it is cheapest.

The deal, which was concluded about a month ago, is expected to be announced as early as Thursday. Neither San Jose, Calif.-based Cisco nor Grid Net would comment on the size of the investment, but a person familiar with the situation indicated it was less than $10 million.

The investment comes as technology companies like Siemens AG (SI) and General Electric Co. (GE) stake claims in the growing smart grid market. Cisco has been particularly vocal about the prospects of the smart-grid market, which is estimated to be worth about $43 billion in the next few years.

The concept behind smart-grid technology is to modernize the electricity industry by using digital communications to help optimize the flow of electricity and ensure dependability. Many concepts are similar to those used in controlling the flow of information over communications networks, which automatically route around bottlenecks or disruptions.

"The idea that this will mirror how communications networking technology works is spot on," said Laura Ipsen, who runs Cisco's smart grid projects, in an email. "We believe that an (Internet Protocol)-based communications infrastructure will form the basis of the smart grid from generation to business and the home, much as it created the backbone of the Internet."

Ray Bell, Grid Net's chief executive officer and a Cisco alum, said the two companies would work together on new products that integrate both companies' technologies. He added that Cisco has an observer on Grid Net's board of directors.

Grid Net counts General Electric and Intel Corp. (INTC) among its partners.