Cisco buys XML startup Reactivity

It has been a few years since Cisco Systems (CSCO) outlined a vision for what the San Jose based company calls Applications-Oriented Networking or AON. Think of it as Cisco-twist on Services Oriented Architecture! Like optical, high performance routing, storage and consumer, AON has been identified by CEO John Chambers as an area of strategic importance and future growth.

Chambers & Company have argued that the applications and network infrastructure have to be highly enmeshed to deliver performance needed by the future enterprise. It is hard to tell how much money this initiative is bringing in, but it is clear the company is pretty serious, and seems to buy start-ups to bolster this business.

Today, the router maker announced that it is buying Redwood City, Calif.-based XML gateway maker Reactivity for $135 million.

The deal is a setback for F5 Networks, which has been a strong partner for Reactivity. No such problems for Reactivity’s backers like Accel Partners and Diamondhead Ventures – they are laughing all the way to the bank.

This is the third company Cisco has acquired in 2007. It acquired Ironport Systems, a messaging-security company for $830 million in January, and more recently picked up Five Across, a CMS maker for a rumored $30 million. (That’s a billion dollar buying binge already and we are not even out of February. VCs, investment bankers and law firms rejoice, Cisco has a check book wide open.)

“Reactivity together with our Application Control Engine (ACE) provides a highly capable solution for customers’ application delivery needs in the data center,” said Jayshree Ullal, Senior Vice President, Datacenter Switching and Security Technology Group (DSSTG), about the Reactivity acquisition. Though not as recent, the May 2005 acquisition of FineGround Networks, an application acceleration device maker can be lumped in the AON related deals.

The big question is if this deal is going to lead to more XML/SOA related M&As in the near future. Who else could get bought or who could go on a prowl? Thoughts?