"But Bob Lam, an analyst with Bear Stearns (NYSE: BSC), says Cisco didn't pay too much for the newest addition to its fold. "The Web content market is really a hot space," Mr. Lam said. "It's a good move for Cisco, because they have the currency to do it."
On that last point, Mr. Benik agreed.
"If they needed to pull the trigger, a billion dollars here or there probably doesn't matter to Cisco," he said.
Specifically, Mr. Lam noted that competitors like F5 Networks (Nasdaq: FFIV) and Alteon Websystems (Nasdaq: ATON) probably will still do well, even though they're now competing against Cisco instead of Arrowpoint.
"Cisco's move validates the market segment's growth," Mr. Lam said. "But Arrowpoint's not the only game in town."
Though Arrowpoint was not yet profitable (the company had a net loss of approximately $4.75 million in its most-recent financial quarter, which ended March 31), it has been nothing but successful in its short run as a publicly traded company. After its initial offering of $34 per share, the company closed its first day of trading up almost 250 percent, at $118.47. Though the stock price dipped to near $60 in mid-April, it quickly recovered and has been moving steadily up, closing at $140.19 on Friday, up $5.38, after the Cisco deal was announced.
The Acton, Massachusetts-based Arrowpoint, which has 337 employees, will become part of Cisco's service provider line of business, with Mr. Wu reporting to Mr. Kennedy. Cisco, which will exchange 2.1218 shares of its stock for every outstanding share and option of Arrowpoint, expects to close the deal by the end of June. The deal will be accounted for as a pooling of interests, and has already been approved by the boards of both companies. Based on Cisco's Thursday closing price of $63.63, the deal's value is approximately $5.7 billion. Cisco closed trading for the week at $67.75 per share.
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