Cisco to acquire Acacia Communications for $2.6bn

10 July 2019 | Jason McGee-Abe

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Cisco has entered into a definitive agreement to acquire Acacia Communications as it seeks to strengthen its switching, routing and optical networking portfolio.

Under the terms of the agreement, Cisco has agreed to acquire Acacia for $70.00 per share in cash, or for approximately $2.6 billion on a fully diluted basis, net of cash and marketable securities.

As Cisco and Acacia come together, Cisco plans to support Acacia’s existing customers and new customers that want “industry-leading coherent optics, digital signal processing / photonic integrated circuit modules, and transceivers for use in networking products and data centres”.

“By innovating across software, silicon and optics, Cisco is reinventing every domain of the network with our intent-based architectures,” said David Goeckeler, executive vice president and general manager of Cisco’s networking and security business.

“With the explosion of bandwidth in the multi-cloud era, optical interconnect technologies are becoming increasingly strategic. The acquisition of Acacia will allow us to build on the strength of our switching, routing and optical networking portfolio to address our customers’ most demanding requirements.”

The primary challenges for cloud and service providers in data centre interconnect (DCI), metro and longhaul networks are “increase the capacity on the “existing” fibre infrastructure, drive down the cost/bit, and automate to lower opex and eliminate human error,” said Bill Gartner, head of Cisco’s optical systems and optics business.

Gartner added: “Solutions to these challenges will drive significant architectural shifts for service providers. A key trend in this segment is the migration from chassis-based solutions to pluggable optics. Functions that were traditionally delivered in separate chassis-based solutions in a separate optical layer will be available in a pluggable form factor as part of the IP layer – offering significant benefits for network operators in terms of operational simplicity and lower cost.”

An existing Cisco supplier, Massachusetts-headquartered Acacia designs and manufactures high-speed, optical interconnect technologies that allow webscale companies, service providers, and data centre operators to meet the fast-growing consumer demands for data. Cisco has certainly bolstered its ranks as architectural shifts for service providers increasingly emerge.

Innovation across software, silicon and optics is fuelling Cisco’s initiative to make networks smarter, simpler and more secure. Acacia’s technology will enrich Cisco’s optical systems portfolio. It will also allow the growing number of customers transitioning from chassis-based systems to pluggable technology to simplify operations and reduce network complexities.

“Coherent technology has been a game-changer for optical networking and continues to evolve with the deployment of pluggable coherent optics,” added Raj Shanmugaraj, president and chief executive officer, Acacia.

“Upon close, Cisco and Acacia will continue to serve and support existing Acacia customers. By integrating Acacia technology into Cisco’s networking portfolio, we believe we can accelerate the trend toward coherent technology and pluggable solutions while accommodating a larger footprint of customers worldwide.”

The acquisition is expected to close during the H2 of Cisco’s FY2020, subject to customary closing conditions and required regulatory approvals.

Upon completion of this transaction, Acacia employees will join Cisco’s optical systems and optics business within the networking and security business under David Goeckeler.