Cisco buys VPN maker for US$181M

Cisco Systems Inc. will acquire Allegro Systems Inc., a VPN (virtual private network) developer, in an all-stock transaction valued at US$181 million, Cisco announced Friday.

Cisco has targeted the privately held company for its VPN acceleration and security technologies, which will be used to build out Cisco's current VPN and security products, Cisco said in a statement.

Cisco will use the Allegro Systems technology and personnel talent to make it more secure for Cisco's corporate customers to connect their employees and customers remotely over corporate networks and the Internet, Cisco said. Specifically, the Allegro technology will be used to enhance the SAFE security blueprint for Cisco's Architecture for Voice, Video and Integrated Data (AVVID) network infrastructure, the company said on its Web site.

The boards of both companies have already approved the deal, which is expected to close by October -- the end of the first quarter of Cisco's fiscal year 2002, the company said. Cisco, which already holds a minority investment in Allegro, plans to take a one-time charge for purchased in-process research and development expenses, the company said. That charge is not to exceed $0.01 per share, Cisco said.

Pending standard regulatory approval, Milpitas, California-based Allegro Systems, which was founded in August 2000 and currently has 39 employees, will be folded into Cisco's VPN and security services business unit, Cisco said. All of Allegro's employees are expected to join the Cisco unit, including Allegro's chief executive officer (CEO), Mano Murthy, and its chief technology officer (CTO), Ashwath Nagaraj, Cisco said.

This is the second acquisition Cisco has made in July. On July 11, Cisco announced it had acquired AuroraNetics Inc., a metropolitan network technology company, for $150 million in stock. Cisco bought 23 companies last year but had not made any acquisitions this year before buying AuroraNetics.

In a separate interview with the IDG News Service on Wednesday, Cisco Chief Strategy Officer Mike Volpi said the company is focusing on profitability by making its high-end routers more adaptable to broadband technologies for its corporate customers. Cisco believes its future revenue will depend on the establishment of services over broadband, such as voice-over-IP and video-on-demand, Volpi said. The latest acquisitions are part of that long-term outlook, and even in the currently difficult market conditions, Cisco plans to continue to internally develop, partner and acquire, the company said.

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