Cisco makes a buy

Despite a desolate market for merger and acquisition activity, Cisco System’s acquisition this week of AuroraNetics bucks the trend though.

Cisco will acquire the company for $150 million in stock, marking the first acquisition of the year for Cisco. Cisco acquired a staggering 71 companies from 1993 to 2001, yet it hadn’t announced any new acquisitions since December of 2000.

“[AuroraNetics] has one of the few teams that reliably delivers silicon,” said Graeme Fraser, vice president and general manager of Cisco’s metropolitan IP access business unit. “The acquisition was based on the talent of the group,” Fraser said.

AuroraNetics develops silicon for use in resilient packet rings, which is a developing technology that creates data-optimized fiber rings. So far the technology has much work to go on the standards front though, according to most service providers. Fraser noted that works is progressing on standards and that as more vendors begin contributing that process will likely be expedited. Cisco plans to outsource the technology back to other equipment developers.

“10Gb/s is a sweet spot in the industry and we are committed to it. This acquisition helps further that,” Fraser said. “We want to make sure we are well positioned in the future in terms of competition.”

With the acquisition, Cisco is also straying from its long-time stance of outsourcing silicon and components. Ironically, other large vendors such as Alcatel, Lucent and Nortel are all working to separate themselves from their components businesses now that the market has changed.