Economy

Cisco Acquisition Sends Acacia Communications Shares into Orbit

Cisco Acquisition Sends Acacia Communications Shares into Orbit”

Cisco management is investing aggressively in network performance technology given increasing demands from data center operators and telecommunication companies, and analysts say Cisco is positioning itself well for the next several years of rapidly expanding data transmission over high-speed internet networks.

David Goeckeler, EVP/GM of Cisco's networking and security business outlined the rationale for the takeover as follows: "Optical interconnect technologies are becoming increasingly strategic with the explosion of bandwidth in the multi-cloud era".

The deal is aimed at service provider customers, but solutions geared to large cloud and service providers often trickle down to enterprise customers, said Jason Parry, vice president of client solutions for Force 3, a Cisco Gold Partner and one of the tech giant's top federal partners.

"That technology today is typically delivered via a line card on a big chassis in a separate optical layer but with Acadia's digital signal processing, ASIC and other technology we are looking to move that from a line card to a pluggable module that increases network capacity, but also reduces complexity and costs". Acacia CEO Murugesan Shanmugaraj said during the joint call with Cisco Tuesday that it meant to continue to service both existing and new customers, including these third-party vendors.

In addition, Acacia uses silicon photonics as the platform for integration of multiple photonic functions for coherent optics, Gartner wrote in a blog about the acquisition. Cisco said Acacia's technology will enhance this portfolio.

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Pluggable coherent optics Acacia's own CEO, Raj Shanmugaraj, described coherent optics technology as a "game-changer" for optical networking, adding that the deployment of pluggable coherent optics would build on that impact.

Acacia said it would continue to serve its existing customers, which include Cisco itself.

Cisco is paying $70 per share for Acacia, which traded higher by 35% on Tuesday morning following the announcement.

The acquisition is expected to close during the second half of Cisco's FY2020, subject to customary closing conditions and required regulatory approvals.

In 2018, Acacia posted a net income of only $5 million, as sales dipped 12 per cent on the prior year's total, to $340 million.



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