Cisco to buy private silicon technology developer

SAN JOSE: Cisco Systems Inc., the world's largest maker of Internet

networking gear, on Wednesday said it would pay $150 million in stock to buy

AuroraNetics Inc., its first acquisition in a year when the economic malaise has

drastically slowed the pace of deals.

Cisco, based in San Jose, California, said the acquisition of the privately

held developer of silicon technology for metropolitan fiber networks is expected

to close in the first quarter of its fiscal year ending in October 2002. It will

result in a one-time charge of not more than 1 cent a share.

"The metro market is probably one of the most vibrant markets in the

communications industry today because of the build-out required to enable some

of the services people talk about," Ammar Hanafi, head of Cisco's global

acquisition activity, told Reuters.

Cisco's stock closed up 3.1 per cent, or 50 cents, at $16.70 in Nasdaq

trading on Tuesday. Over the past year, it has underperformed the Nasdaq 100

index by about 39 per cent.

It was Cisco's first announced acquisition this year. It said it would buy

ExiO, a maker of wireless technology, for $155 million in stock last December, a

deal that closed in February.

Before the economic slowdown that has hit all technology companies, Cisco

grew aggressively by using its stock to buy technology and companies. Cisco

shares peaked in March 2000 at about $80, before sinking steadily to hit a 2

1/2-year low of about $13 in late May.

"The market was going through so many radical transitions that we wanted

to be cautious about how we approached acquisitions," Hanafi said in a

telephone interview. He added that opportunities for acquisitions have increased

during the slowdown and Cisco is reviewing possible deals all the time.

Last year the San Jose, California-based company purchased 23 firms in deals

ranging in value from $20 million to almost $6 billion. The previous year it

closed 18 deals, with values ranging from $25 million to $7 billion.

AuroraNetics' technology will fit with Cisco's other metro Internet Protocol,

or IP-based, products for the metro area, Hanafi said. Cisco also offers optical

networking, gigabit ethernet and older SONET, or Synchronous Optical

Network-based, products for the metro market.

The deal also adds AuroraNetics' high-end 10-gigabits-per-second technology,

where Cisco only offers 2.5 gigabits, he said. Cisco said it plans to license

AuroraNetics' silicon design to other companies.

AuroraNetics, also based in San Jose, was founded last year and has 52

employees.

(C) Reuters Limited 2001.