Cisco Bids For Acacia In Latest Optics Bet -- WSJ
July 10 2019 - 3:02AM
Dow Jones News
By Sarah E. Needleman
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 10, 2019).
Cisco Systems Inc. has agreed to buy equipment manufacturer
Acacia Communications Inc. for about $2.6 billion, as it looks to
serve rising performance demands on networking gear from data
center operators and telecom-service providers.
Cisco said Tuesday it will pay about $70 in cash for each Acacia
share outstanding, a 46% premium to Acacia's Monday closing price
of $48.06.
Shares of Acacia surged more than 35%. Cisco's stock traded 0.3%
higher.
Acacia, a Maynard, Mass.-based maker of optical interconnect
technologies like modules and semiconductors, derived roughly 14%
of its $339.9 million in revenue last year from Cisco. Acacia was
formed in 2009 and went public in May 2016.
Cisco said Acacia's technology will enable users of its hardware
to drive more data over high-speed internet networks. Cisco
executives said the company is looking to take advantage of a
growing trend of customers migrating to pluggable technology from
chassis-based systems. Pluggable modules give network operators a
more efficient way to increase the data that runs over
networks.
The Acacia deal is the latest in a string of acquisitions Cisco
has made in the optics space, gobbling up firms like Lightwire
Inc., CoreOptics Inc. and Luxtera Inc. It is also the company's
largest purchase since 2017.
"It shows them really looking to expand their networking
business from the optical as well as the software side," Wedbush
analyst Dan Ives said. "And with 5G around the corner and more and
more data running through the pipes, Cisco is starting to position
the portfolio accordingly."
By bringing suppliers in-house, Cisco also gains more control
over the networking food chain, Mr. Ives said. "This is [Chief
Executive Chuck] Robbins and company going on the offensive around
M&A," he said.
Cisco declined to comment on whether it competed against other
bidders for Acacia.
The San Jose, Calif., company has grown modestly in recent
years. One of Silicon Valley's oldest members, Cisco posted $49.33
billion in revenue in the year ended July 28, 2018, up 2.7% from
the prior year. Revenue is projected to exceed $50 billion this
year.
The networking giant has continued to grow over the past two
quarters, even as it has raised prices in response to tariffs the
Trump administration placed on U.S. imports of Chinese-produced
goods. Duties of 10% were assessed on a range of imports last fall,
and that percentage was later raised to 25% in May.
Cisco said the acquisition will have to undergo regulatory
reviews, including from authorities in both the U.S. and China. The
deal is expected to close in the second half of Cisco's next fiscal
year, which would end around late July of 2020.
--Colin Kellaher contributed to this article.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
July 10, 2019 02:47 ET (06:47 GMT)
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