Cisco to buy metro network company AuroraNetics

Cisco Systems Inc. announced its first acquisition of the year Wednesday, picking up metropolitan network technology company AuroraNetics Inc. for US$150 million in stock.

Founded last year, San Jose-based AuroraNetics develops 10G-bps (bits per second) silicon technology for metropolitan fiber networks, specifically for resilient packet rings (RPR).

Traditional synchronous optical networks (SONET) use two rings of fiber-optic lines to transmit voice or data signals, one primary and one redundant backup carrying the same data stream. RPR essentially allows the SONET rings to double their capacity by using the redundant lines for additional data. If a problem develops with one line, RPR shifts all the traffic to the other line at half the throughput.

The Institute for Electrical and Electronics Engineers Inc. (IEEE) has not yet settled on a standard for RPR. Cisco's proprietary flavor of the technology, dynamic packet transport, which is based on the spatial reuse protocol (SRP) open standard, is in widest use. The AuroraNetics acquisition enables Cisco to scale its technology up from the current 2.5G bps up to 10G bps, according to a statement from Cisco.

Cisco intends to license AuroraNetics' silicon design to companies interested in producing and participating in the development of 10G-bps SRP RPR-based solutions, the company said.

Cisco bought 23 companies last year, but not a one this year, until Wednesday. Company executives said last month that Cisco intended to curb its acquisition strategy this year, making more selective choices. Though Cisco remains one of the strongest network equipment makers around, market setbacks have cut its stock price by two-thirds, making its stock a less-useful currency for acquisitions than it once was.

The acquisition of privately owned AuroraNetics will be accounted for as a purchase, and Cisco expects to close the purchase in the first quarter of Cisco's fiscal year 2002, starting at the end of the month, according to the release. Cisco expects to take a one-time charge for purchased in-process research and development expenses not to exceed $0.01 per share in connection with the purchase. The board of directors of each company have approved the deal, which is subject to various closing conditions.

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