Cisco Systems has agreed to purchase little-known networking company Cerent for $US6.9 billion in stock -- Cisco's biggest acquisition to date.

The Wall Street Journal Online reports the deal is "another sign of the mind-boggling impact of the Internet on corporate valuations".

The report states the deal is actually believed to be the highest price ever paid for a closely held technology company.

Cerent is a Californian-based company that manufactures devices to route telephone calls and Internet traffic on and off fibre-optic lines, the Wall Street Journal reports.

However, the company has only achieved $10 million in sales since its launch two and a half years ago and has apparently turned a profit.

Greg Rossmann, managing director of the technology investment banking firm Broadview International, told the Wall Street reporter the deal is "unbelievable, and unprecedented".

"It is truly reflective of the expectations for how the Internet infrastructure is going to be forced to evolve to support the demands of e-commerce," he said.

Cisco Australia was not aware of the deal when ARN called to investigate.