Cisco to acquire Net telephony firm

Cisco Systems on Wednesday agreed to acquire SignalWorks, a software company that specializes in Internet phone technology, for $13.5 million in stock.

The acquisition highlights Cisco's efforts to develop and sell telephone systems that run on the Internet instead of standard phone lines. The networking giant plans to integrate SignalWorks' voice and digital signal processing technology into its own Internet Protocol communications products. The SignalWorks team will report to Cisco's voice technology group under vice president Don Proctor.

The acquisition is expected to close by the fourth quarter of Cisco's fiscal year.

IP telephony has become a way for Cisco to sell its equipment to small businesses, and it remains an adjunct to its core business of selling routers. Cisco has already shipped 1.5 million IP phones and lists 6,000 customers for this business.

IP telephones use the Internet instead of phone lines, skirting a phone company's copper line network and the accompanying long-distance charges. Although still a nascent industry--and one facing increasing pushback from telecommunications giants--IP telephony is expected to rise from $900 million last year to $4.3 billion in 2006, according to Synergy Research Group.

Separately, Cisco on Wednesday announced plans to repurchase up to $5 billion worth of its common stock. Since January, the company has repurchased 317 million shares valued at $4.4 billion.

News.com's Ben Charny contributed to this report.