The largest networking equipment maker, Cisco, is reportedly in talks with optical chip technology company Luxtera for a possible acquisition. According to reports, Cisco out-bid rival companies such as Intel and Broadcom for this acquisition.
While no valuation of sale price has been disclosed, it is highly likely that Luxtera will be worth hundreds of millions of dollars. Representatives from both the companies are yet to comment on these reports.
Luxtera develops silicon photonics technology, which is a method of converting information from photons and fiber optic cables to semiconductors that speed up the transfer of data. Luxtera says it can make a high volume of chips that can do that job, something that has eluded other companies in the industry for years. This acquisition would give Cisco a more fundamental technology to differentiate its products and better capabilities in the components it currently uses to build networking machinery.
Under Chief Executive Officer Chuck Robbins, Cisco has expanded into software and networking services to lessen its dependence on proprietary hardware and software combinations.
Kent MacDonald, senior vice president of strategic alliances at Long View Systems, a Canada-based solution provider that works with Cisco, said the acquisition would be a well-timed and “shrewd” move by Cisco as the market continues to deal with widespread component shortages. “I see this as a shrewd and timely investment by Cisco to accelerate innovation and create a competitive advantage in the market, especially with component supply an ongoing issue for the industry,” MacDonald said.
“Cisco’s bread and butter is still in the highest-end forms of connectivity, and with 5G on the horizon and Wi-Fi speeds now multi-Gig, speeds will continue to increase exponentially,” said Ben Johnson, CEO of Liberty Technology, solution provider that works with Cisco. “With the explosion of IoT, I think it’s absolutely vital for Cisco to maintain their position in the core switching market and to rapidly increase switching speeds,” Johnson said. “We’ve seen the release of 10G, 40G and even 400G switches, but even those speeds aren’t enough to handle the bandwidth tsunami on the immediate horizon. I’m excited to see more investment in physical, silicon-based technology.”