BANGALORE, INDIA: Cisco said it would join hands with power meter maker Itron Inc to develop a communication platform for smart grids, in a move seen as the networking giant's first investment in this lucrative market.

Itron's stock, which has lost about 19 percent of its value in the last three months, rose as much as nine percent to touch $58.85 Wednesday on Nasdaq as the alliance with the technology bellwether opens up new markets.

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Under the terms of the agreement, Itron will license and embed Cisco's Internet protocol technology within its OpenWay meters, enabling wired and wireless communications among various components of smart grids.

"Although Cisco has been flirting with smart grid for several years, this is the first serious partnership or investment in the space," said Jefferies & Co analyst Jesse Pichel. "It signals that Cisco believes smart grid could be a big market."

According to a recent study by ABI Research, global investment in smart grids, which aim to increase efficiency in the transmission of electricity, and smart meter implementations will top $45 billion by 2015.

The United States is gradually converting its electrical transmission systems into smart grids, which are networks that will bring new efficiencies from thousands of miles of power lines.
Such networks would require the need for efficient meters, communications systems, data integration and other software.

Itron's venture with Cisco targets power utilities, which are expected to deploy millions of meters across their grids in the next few years and would require a common platform to manage them.

"It is not unreasonable to think that many of these utilities within 5 to 10 years may have as many as 10 million devices that they have to manage in terms of networking, security, provisioning and the like," said Philip Mezey, Itron's senior vice-president and chief operating officer for North America.

Washington-based Itron, which is the one of the world's largest provider of smart meters and utility software systems, will also distribute Cisco networking equipment and software as part of OpenWay system deployments.

Analyst Pichel said the alliance with Cisco was a positive for Itron as it brings more credibility to its product offerings and better negotiating power in lowering the manufacturing cost of next generation product offerings.

The companies did not provide a timeframe for the deployment of the new platform, neither did they reveal the financial terms of the agreement.

"(The deal is) definitely reflective of the evolving customer needs toward more open IP-based networks that can accommodate a variety of applications not now but also in the future," said Ben Schuman, analyst with Pacific Crest Securities.

Cisco said the alliance with Itron was not exclusive and it was open to discussions with other smart grid vendors as well.

Other smart meter makers include Roper Industries and General Electric.

"The focus is with Itron for now," said Laura Ipsen, Cisco's general manager for smart grid.

Cisco shares were up two percent at $20.43 in afternoon trade on Nasdaq.