Wireless LAN behemoth Cisco Systems Inc. (Nasdaq: CSCO) is finalizing a deal to acquire switch startup Airespace Inc. for between $400 million and $425 million, according to sources.

Cisco has long been rumored to be looking into acquiring a wireless LAN switch company to bolster its centralized management story. In fact, the company is also said to have looked at Aruba Wireless Networks as a potential acquisition candidate in the past (see Is Cisco Seeking Security?).

News.com first reported rumors of an acquisition, citing a price of between $400 million and $500 million for the buyout.

Unstrung has been told that Cisco is now fairly well advanced with the Airespace acquisition and the deal should close within 20 days. The deal is now said to be in the hands of the Department of Justice.

Airespace wouldn't comment on what it described as rumors. Cisco hadn't returned calls by press time.

Airespace is the fastest growing of the new breed of wireless LAN switch startup. After just two years in operation, it is now the third largest supplier of enterprise wireless LAN equipment after Cisco and Symbol Technologies Inc. (NYSE: SBL). (See Synergy: Switches Sizzle .)

Airespace made revenues of $18.2 million in the third quarter of 2004, according to Synergy Research Group Inc.

Acquiring Airespace would help give Cisco the technology portfolio to battle Symbol and the startups in 802.11 switch market. It would also be a big black eye for Cisco's networking rivals Alcatel SA (NYSE: ALA; Paris: CGEP:PA) and Nortel Networks Ltd. (NYSE/Toronto: NT), as both of these firms offer rebadged Airespace kit as part of their WiFi portfolios (see Alcatel & Nortel Push VOWLAN).

Cisco's last wireless LAN acquisition of this magnitude was consumer device maker Linksys for $500 million last year.

— Dan Jones, Site Editor, Unstrung