SAN JOSE -- In a surprise move, Cisco Systems Inc. here has announced plans to acquire the remaining shares in Radiata Inc., an Australian-based supplier of chip sets for wireless local area networks (WLANs). The transaction will be made with stock valued at $295 million.
Cisco currently holds an 11% stake in three-year-old Radiata, which is based in Sydney, and the new transaction announced on late Monday will give the San Jose communications systems maker full access to Radiata's technology for the emerging IEEE802.11a standard in 5-GHz wireless networks. Radiata's chip sets that enable wireless data in offices to be networked at up to 54 megabits per second.
Radiata's product portfolio includes both baseband and radio frequency (RF) chips, which will be integrated in Cisco's family of Aironet WLAN products, including access points, adapters, and bridges. It is unlikely that Cisco will sell Radiata's chip sets in the merchant market, according to industry observers.
Cisco is currently shipping Aironet 340 Series line of products based on the IEEE 802.11b wireless standard, which operates in the unlicensed 2.4-GHz frequency range at speeds up to 11-megabits-per-second. Cisco reportedly uses chip sets from Intersil Corp. in its current Aironet 340 line. Even though Intersil today announced plans to enter the chip set market for the 802.11a standard, San Jose-based Cisco will reportedly use the ICs from Radiata in its next-generation systems, analysts speculated.
Founded in 1997, Radiata is one of several chip makers that are scrambling to develop chips for the 802.11a standard. Radiata developed its technology, based on the research conducted by the Commonwealth Scientific and Industrial Research Organization, an Australian government research agency and Macquarie University in Sydney.
Radiata's 53 employees will join a new business unit in Cisco, dubbed the Wireless Networking Business Unit of the Ethernet Access Group in Cisco's Commercial Line of Business.
Under the terms of the agreement, Cisco's stock will be exchanged for all outstanding shares and options of Radiata. This acquisition will be accounted for as a purchase and is expected to close in the second quarter of Cisco's fiscal year 2001.
In connection with the acquisition, Cisco expects a one-time charge for purchased in-process research and development expenses not to exceed $0.02 per share. The acquisition has been approved by the board of directors of each company and is subject to various closing conditions.
Industry observers noted that it is not unusual for Cisco to buy a chip company if and when the deal makes sense. In fact, the San Jose company has purchased chip suppliers when the technology is difficult to buy in the merchant markets. In some cases, Cisco has acquired a company to prevent its competitors from using the technology, analysts noted.
In 1997, for example, Cisco acquired Skystone Systems Corp., a supplier of SONET/SDH chips, for $66.5 million. In early 1999, Cisco took a small equity stake in StratumOne Communications Inc. of Santa Clara, Calif., which is a supplier of chips for SONET/SDH technology. In July of 1999, Cisco acquired the remaining shares of StratumOne for $435 million in stock.