Interesting references to LU. Sentient claimed superiority to Cascade technology 2 years ago and...
Cisco agrees to buy two startups for $445 million
By Duncan Martell
PALO ALTO, Calif., April 8 (Reuters) - Cisco Systems
Inc.<CSCO.O> on Thursday said it agreed to buy two closely-held
companies for a combined $445 million in stock, the latest move
by the world's largest data networking company to acquire
technology that combines voice and data on one network.
Cisco said it plans to buy Fibex Systems Inc., of Petaluma,
Calif. and Sentient Networks Inc., of Milpitas, Calif. It
expects to complete the acquisitions in the fourth fiscal
quarter, saying that boards of both companies had approved the
deal. Further financial terms were not disclosed.
Both companies have products that use so-called ATM
technology, which is one way that information is shuttled back
and forth across networks. Another technology, IP, or Internet
Protocol, is the lingua franca of the Internet but is not
reliable enough to carry large amounts of voice traffic across
networks, analysts said.
The deal brings to 32 the number of companies Cisco has
bought since its first acquisition in 1993. It also highlights
Cisco's strategy of buying technology it does not already have
to move into new markets. Cisco, Lucent Technologies Inc
<LU.N>. and Northern Telecom Ltd <NTL.TO>. are all racing to
provide gear that combines voice, data and video on one
network.
Carriers, such as AT&T Corp <T.N>. and MCI Worldcom Inc.
<MCOM.O> are curtailing their spending on traditional
circuit-switched networks while shifting spending to more
efficient ones that break up voice into packets that are then
reassembled.
Already, ATM technology is being used quite extensively by
telecommunications carriers and, analysts said, Cisco has to
boost its presence in that area if it is to gain market share
with carriers. Lucent and Nortel, on the other hand, have
decades of experience selling equipment to them.
"Cisco's challenge is to develop credibility in the carrier
market and they need to do that in direct competition to both
Lucent and Nortel," said John Armstrong, an analyst with market
research firm Dataquest.
Cisco said it would sell the companies' current products
but would over time enhance them with its own software and
technology. The two companies employ 202 people and the
acquisitions will be neutral to earnings this year and add to
them in fiscal 2000, Cisco said.
"This is important for Cisco because we have a very crisp
vision of what the new world network is going to look like,"
said Ammar Hanafi, a member of San Jose, Calif.-based Cisco's
business development group. "That network is built around
Internet technology and transitioning the whole infrastructure
of service providers."
Lucent and Nortel have in the past several months announced
products that use technology similar to Fibex's and Sentient
Networks'. Hanafi said Cisco engineers have already spent a
good deal of time working with Fibex's and Sentient's products.
"We're very comfortable with their products and believe
that, combined with our technologies, we will continue to win,"
Hanafi said.
Though most analysts expect Lucent and Cisco to be the
largest two companies selling equipment that combines voice,
data and video on one network, the jury is still out on who
will emerge top dog.
"Cisco has an uphill battle but they're an excellent
marketer and they've been able to grow their business very
successfully through acquisitions," Armstrong said.
((--Palo Alto, Calif. bureau, 650-846-5401,
duncan.martell@reuters.com))
REUTERS
Copyright REUTER 15:53 04-08-99
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