A switch for Bay Networks

Bay Networks (BAY) said today that it has acquired NetICs, a high-performance Fast Ethernet switch maker, for about $99 million in cash and stock.

NetICs, an Acton, Massachusetts, company founded last year, has a beta 10/100 Ethernet switch that uses its specially designed ASIC chip. This chip is designed to allow users to transfer from segment switching to 10-mbps switching to 100 mbps without replacing the switch. The switches are schedlued for release in the first quarter next year.

Under the deal, Bay Networks will get a new generation of 10/100 Ethernet switches and NetICs's capability to design the ASIC chips, improving Bay's time to market for its products.

"This deal gives Bay a low-cost, high-performance ASICs and the internal expertise to make it. This will also improve its time to market with products, which is a significant issue," said Don Miller, an analyst with Dataquest.

Dick Eyestone, vice president of product and market management, estimates that the 10/100 switches could give the company a three- to six-month lead to market over similarly priced products that perform the same function.

Eyestone added that Bay is hoping to lure customers from competitors who were either thinking of using or purchasing a 10-mbps switch but find they can integrate a faster 10/100 switch into their system for nearly a comparable cost. "We will create a new category," he said.

Under the deal, NetICs will be an independent operating group in Bay's enterprise business unit. Gary Vacon, NetICs' founder and president, will become a vice president in the group.

NetICs, a start-up, has not produced any revenues since it has yet to ship a product.

"We see Bay Networks as a company that is well-positioned in the Fast Ethernet switch market, and we are excited to be an integral part of this team," Vacon said.

Bay said it expects to take a one-time charge in the quarter ending December 31 relating to the aquisition.