Looking to bring some key component technology in-house, Cisco Systems, Inc. has acquired StratumOne Communications Inc., a Santa Clara, Calif.-based supplier of SONET chips, for $435 million in stock.
The deal-Cisco's largest chip acquisition ever-gives the LAN/WAN-equipment giant access to StratumOne's IC technology, reportedly including a line of framer-IC products for use in cutting-edge OC-192 (10-Gbit/s) networks, sources said.
StratumOne and Cisco are no strangers . Earlier this year, San Jose,Calif.-based Cisco took a small equity stake in StratumOne, a two-year-old company that competes in the framer-chip arena against the likes of AMCC, Lucent, PMC-Sierra, Vitesse, and others.
Analysts believe that Cisco will use StratumOne's technology for internal consumption only.
As part of the deal, StratumOne president and CEO Vijay Parikh will report to Graeme Fraser, vice president and general manager of Cisco's Optical Internetworking Business Unit. No layoffs are planned for StratumOne, which has 78 employees.
Under the terms, Cisco will exchange between 6.31 million to 7.72 million shares of its common stock for all outstanding shares and options of StratumOne. Based upon Cisco's June 28, 1999 closing price of 61.9375, the stock exchanged would have a value of approximately $435 million. This acquisition will be accounted
for as a pooling of interests and is expected to close in the first quarter of Cisco's fiscal year 2000.
The acquisition has been approved by the board of directors of each company and is subject to various closing conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements.