The acquisition will bring it into competition with a whole raft of vendors offering equipment to connect broadband access to a range of devices in homes and small offices. Among the new entrants is Microsoft Corp whose hardware activities include home networking based around the 802.11b Wi-Fi wireless local area networking standard.
With corporate spending stalled, the home offers a certain growth market for the major vendors, as increased availability of inexpensive broadband access across the world will enable users to connect a proliferation of devices in the home.
Cisco quoted estimates from the Dell’Oro Group that the consumer/SOHO networking market will grow from $3.7bn in 2002 to $7.5bn in 2006.
If it can gain a substantial slice of that market, the $500m that Cisco is offering in stock for privately held Linksys will be a bargain. Cisco estimates the acquisition will dilute its earnings in the current financial year by no more than $0.01.
Irvine, California-based Linksys was founded in 1998 and boasts that it has become the leading supplier of sales of wireless, routers, network cards and USB adapters to SOHO users through retail and e-commerce channels. The company employs 308 staff and its current annual revenue is about $400m.
Cisco CEO John Chambers said the acquisition is an example of its strategy to broaden its networking portfolio into growth markets such as wireless VOIP, and storage area networking.
Linksys will operate as a division of Cisco, but its products will continue to be sold under the Linksys brand. With access to Cisco’s sales infrastructure, Linksys will gain access to international markets and the service provider channel.
With a $21bn cash pile, Cisco has been relatively quiet on the acquisition front and this is only its third acquisition in the current financial year. Earlier this week, it said it was paying $13.5m for SignalWorks Inc, a Mountain View, California-based developer of software for IP telephone systems.
Source: Computerwire
