Acquires two companies days apart
The first four months of the year were quiet on the M&A front as far as Cisco was concerned. Then the giant struck this week, nabbing not one but two companies in a matter of days.
First on the docket was MOTO Development Group – not to be confused with that bigger, more familiar Moto in Schaumburg, IL. MOTO Development Group is a consumer product design and development consultancy that had a hand in bringing Cisco/Pure Digital’s Flip videocam to market.
MOTO is a privately-held company based in San Francisco, employing more than 35 consultants. Cisco did not disclose what it intends to pay for MOTO but the company will be absorbed by Cisco’s Consumer Products group. Cisco’s hoping MOTO will enhance this group’s consumer product development roadmap.
The second acquisition this week was in the optical networking space for service providers. Cisco said it will pay $99 million in cash for CoreOptics, a maker of digital signal processing ASICs for optical networking equipment.
CoreOptics will help Cisco design and develop ASICs with sophisticated modulation formats and advanced DSP capabilities for products to help service providers deliver 100Gbps over existing fiber.
CoreOptics employees will become part of the Cisco Service Provider Technology Group and work with Cisco’s existing optical engineering teams in Monza, Italy; Bangalore, India; and Richardson, Texas. Cisco has acquired several optical companies over the past decade with inconsistent success.
In 1999, the company paid $7.4 billion for Cerent, a maker of metropolitan networking transmission gear, and Monterey Networks, a maker of optical switches. Cisco killed the Monterey product in 2001 and has steadily lost share and expertise in optical multiservice SONET/SDH provisioning platforms (MSPP) over the years, a $6 billion market where the Cerent platform competes.
Cisco also acquired Pirelli Systems in 1999 for long haul and extended long haul dense wavelength division multiplexing transport. That product line — the ONS 15808 — was discontinued in 2005.
While stating that its intent with most acquisitions is to capture a market in transition and attain a No. 1 or 2 share position, Cisco was No. 10 in the MSPP market in 2009, according to Dell’Oro Group. However, Dell’Oro notes that in the first quarter, Cisco’s optical revenues increased 15% year-over-year, making it the No. 6 vendor by revenue share. And in the WDM Metro market space, where the 15454 also plays, Dell’Oro estimates Cisco was the No. 3 vendor on a revenue share basis.
And Infonetics Research notes the Cisco and Fujitsu posted large first quarter market share gains in the packet-optical market segment, presumably the area the CoreOptics technology will address.
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