July 11, 2001 7:25 AM PDT

Cisco to buy metro network company

Looking for a boost in the high-growth field of metropolitan network equipment, Cisco Systems on Wednesday said it has agreed to acquire privately held upstart AuroraNetics in a stock deal worth up to $150 million.

With the deal, which marks the first acquisition for Cisco this year, the network heavyweight hopes to use AuroraNetics technology to bulk up its optical-equipment products designed to address the rapid growth of data traffic in metropolitan areas. AuroraNetics, based in San Jose, Calif., makes silicon technology for fiber networks that ships Internet traffic at 10 gigabits per second.

Metropolitan area networks, which service large cities, are expected to be a huge opportunity for network equipment providers because they need to be upgraded to handle a deluge of Internet traffic. Using fiber optics, companies such as Cisco, Sycamore Networks, Nortel Networks and Lucent Technologies can rapidly expand the capacity of connections in large cities.

Like its rivals, Cisco has made efforts to boost its offerings in this segment. Last month, for instance, the company released a higher-capacity version of its optical equipment, called the ONS 15454, which features an OC-192 interface that helps Web traffic move at 10 gigabits per second.

Cisco, also based in San Jose, went on a shopping spree last year, scooping up a number of companies for networking gear intended to handle the convergence of voice, video and data traffic. It has acquired an average of 20 companies a year for the past two years.

Under the terms of its agreement with AuroraNetics, Cisco common stock worth up to $150 million will be exchanged for all outstanding shares of AuroraNetics, which was founded in 2000. The acquisition will be accounted for as a purchase and is expected to close in Cisco's first quarter. The company said it expects to post a one-time charge not to exceed 1 cent per share for expenses tied to the deal.

Cisco plans to license AuroraNetics' technology once the deal gets final approval.

AuroraNetics' 52 employees and senior management will join Cisco's Public Carrier IP Services unit. The acquisition has been approved by the boards of both companies and is subject to various closing conditions.


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