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Cisco Just Bought its Own Supplier for Billion Dollars, But Why?

Cisco has lately reported acquisition of Acacia Communications under a deal worth $2.6 billion.

The premium may turn out to be high because, as well as supplying Cisco, Acacia also supplies Cisco’s rivals Juniper and Arista Networks who may seek alternative suppliers.

Cisco

Under the terms of the deal, Cisco will acquire Acacia for $70 a share in cash. Acacia, which makes optical interconnect technology, is an existing supplier to Cisco.

Acacia develops algorithms for digital signal processing as well as technology for ASIC design and verification, software, integration, and optics optimization.

Cisco said it will support Acacia’s existing customers and new ones using the company’s optics, digital signal processing, transceivers and other gear used in networking equipment.

“By innovating across software, silicon and optics, Cisco is reinventing every domain of the network with our intent-based architectures,” says Cisco’s David Goeckeler,  “with the explosion of bandwidth in the multi-cloud era, optical interconnect technologies are becoming increasingly strategic. The acquisition will allow us to build on the strength of our switching, routing and optical networking portfolio to address our customers’ most demanding requirements.”

Optical interconnect technologies have become a hot area. Cisco’s argument for the deal is that it can use Acacia’s technology throughout its networking portfolio aimed at cloud providers, service providers, and enterprises.

The deal will close in the second half of Cisco’s current fiscal year.

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Niloy Banerjee

A generic movie-buff, passionate and professional with print journalism, serving editorial verticals on Technical and B2B segments, crude rover and writer on business happenings, spare time playing physical and digital forms of games; a love with philosophy is perennial as trying to archive pebbles from the ocean of literature. Lastly, a connoisseur in making and eating palatable cuisines.

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