September 3, 1996 1:45 PM PDT

Cisco buys Granite Systems

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Cisco Systems added multilayer Gigabit Ethernet switching technologies today in a $220 million deal for the privately-held Granite Systems.

Granite's switching technology will be integrated with Cisco's (CSCO) routing software for improved performance.

"Granite brings us more options for switching in the backbone," said Jayshree Ullal, vice president of Cisco systems workgroup business unit.

The rise of Gigabit Ethernet over the next 12 to 18 months, as the Gigabit Ethernet Alliance completes a standard for the technology, fits into Cisco's three-tier CiscoFusion scalable switching architecture model, according to Ullal.

The Gigabit Ethernet and multilayer switching are booming markets because of the rapid growth in corporate networks. Both technologies can alleviate backbone traffic via fast movement of data. Cisco wants a piece of a Gigbit Ethernet market that is expected to explode to nearly $3 billion by the year 2000 from $73 million next year, according to Dataquest, a market research firm.

"Cisco's already made significant investments in Gigabit Ethernet," Ullal pointed out. Cisco is one of the founding members of the Gigabit Ethernet Alliance, along with Granite Systems.

Ullal said Gigabit Ethernet product introductions from Cisco would parallel efforts in the standards area, with integrated offerings expected within 18 months.

The Granite Systems deal marks the fifth acquisition by Cisco this year, the most recent coming last month when the internetworking monster gobbled up Nashoba Networks, a Token Ring switching vendor, for $100 million. The buying spree was highlighted by the April acquisition of Stratacom Asynchronous Tranfer Mode and Frame Relay WAN switching technology for $4 billion.

Granite Systems, based in Palo Alto, California, was founded in 1995. The company's 50 employees and former CEO Andy Bechtolsheim will become part of the Workgroup Business Unit at Cisco Systems.

Cisco Systems will exchange stock worth $220 million for all outstanding shares of Granite. The deal is expected to be completed in October.


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