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Optical/IP

Cisco May Pocket Procket

Cisco Systems Inc. (Nasdaq: CSCO) is in talks to acquire routing rival Procket Networks Inc., and a deal may be close to being finalized, say sources close the company.

Rumors have been bubbling about the deal, and they were first reported yesterday in a networking Weblog, GigaOm. Yesterday evening Network World followed up on the story and reported the deal was done at $80 million.

One source told Light Reading today that the Procket board had signed on for a deal tagged at $80 million. Light Reading was unable to confirm this with a second source. Cisco was one of the original investors in Procket.

Employees at Procket reached by Light Reading on Friday say they've heard the acquisition rumors but have not been told by the company's managers what Procket's fate will be.

A few other Procket employees contacted by phone were not at work. They weren't on vacation, either. Hmmm...

Tony Li says he knows nothing.

What is without dispute is that Procket is trying to find another investor or parent, and needs to refuel or be acquired to keep running. Light Reading's sources said the company raised nearly $30 million at the end of last year. Procket acknowledge that it had raised some funding in January, but wouldn't discuss the funding amount.

"We had a first close of funds in late 2003 and intend to have a second close in Q1 2004 in the same series," said Roland Acra, Procket's president and CEO, in a statement provided to Light Reading in January (see Procket Stuffing Its Pocket).

A delay in that second close, which could have been tied to company milestones, is what may have propelled Procket to start talking to potential buyers. NTT Communications Corp. and Fujitsu Network Communications Inc. (FNC) were among the companies most recently approached, according to one source. Alcatel SA (NYSE: ALA; Paris: CGEP:PA) was an almost-done-deal that fizzled a while ago, say several former Procketeers.

"They tried to sell to Alcatel about a year ago, and when that didn't happen, the customers Procket was close to -- NTT/Verio and AOL, for instance -- took a step back," says a former Procket employee.

That source says the Procket talks with Cisco have gone far. Procket's top software developers -- A.E. Natarajan and Dino Farinacci -- recently visited Cisco's campus along with VP of engineering Jeffrey Purnell to talk technical specifics with the routing giant.

If Cisco did pull the trigger on a deal it would be getting some valuable technology and technical talent, while taking out a key challenger. "Procket challenged every technical boundary in advancing the state of the art for core routing," says a former senior Procket executive. "This may be the last challenge to the existing players in this market for many years, as to play in this market sector requires tremendous sustained investment spread across a broad product portfolio."

It's worth pointing out that Procket has often been reported in talks with suitors. Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Ltd. (NYSE/Toronto: NT) have also reportedly sat across the table from the startup over the past few years (see Will Nortel Pick Procket? and Procket Talk Turns Up).

Cisco does hold a stake in Procket, but some feel it would be crossing a line to acquire the startup, sending a bad signal that conflicts with the recent launch of the new CRS-1 core router, which was unveiled just a few weeks ago Cisco Unveils the HFR).

"Cisco has always maintained that they don't buy competing products," says a former Procket employee who previously worked at Cisco. "They have always bought complementary technologies rather than taking out competitors."

Neither Procket nor Cisco would comment for this story.

— Phil Harvey, News Editor, Light Reading

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diag_eng 12/5/2012 | 1:33:46 AM
re: Cisco May Pocket Procket Rumors on the street say that this isn't happening.

You're clearyly on the wrong street.
UncleBond 12/5/2012 | 1:34:16 AM
re: Cisco May Pocket Procket >Yes. The OS also runs on a standard x86 PC >already. Porting it to other systems would not >be overly difficult.
>
>Whether it would be a good idea or not is >another question.

What other options are left? IOS-MC II planned to be released sometimes in 2010?
/UB
Tony Li 12/5/2012 | 1:34:17 AM
re: Cisco May Pocket Procket Does Procket technology allow the OS to be ported on to other platforms like the 3600?

Yes. The OS also runs on a standard x86 PC already. Porting it to other systems would not be overly difficult.

Whether it would be a good idea or not is another question.

Tony
UncleBond 12/5/2012 | 1:34:17 AM
re: Cisco May Pocket Procket
What is CSCO strategy for platforms other than HFR? Initially, ENA started with development on 7200 platform. CAT6K and GSR were next (cat got bumped out due to politics). 5900 plans got shelved and then everything got folded into HFR. So, what happens to the ailing IOS based products that are going to face competition from Juniper pretty soon? Does Procket technology allow the OS to be ported on to other platforms like the 3600?
/UB
coreghost 12/5/2012 | 1:34:33 AM
re: Cisco May Pocket Procket "If Cisco did buy Procket, it would be interesting how many of the sharp engineers at Procket hung around."

Two words, golden handcuffs...


If that happens, John Chambers is going to have
some interesting morale problems among the
engineers who build and maintain the products
that actually make money for cisco.

There are some particular individuals who, if
they are rewarded for leaving and dissing
cisco with gold, are going create not a
small amount of anger at cisco.

Mr. Mutt 12/5/2012 | 1:34:34 AM
re: Cisco May Pocket Procket "If Cisco did buy Procket, it would be interesting how many of the sharp engineers at Procket hung around."

Two words, golden handcuffs...
coreghost 12/5/2012 | 1:34:39 AM
re: Cisco May Pocket Procket Is it just me or did John Chambers' just diss his entire HFR development team??



No. John Chambers was describing part of the
HFR strategy. A few well-connected people
(and companies) did financially very, very well
out of HFR.

What he is actually saying is that if you work
for cisco itself on the HFR rather than one
of the people brought in through acquisitions
or spin-ins, you are an idiot.

But if you friends picked you for a spin in or
your outside the company with friends in the
right places, cisco will shower money on you
even if your ideas are bad.

The bad thing about Chamber's logic is that he
has no clue who did the hard work on HFR versus
the people who have taken the credit (and the
money).

myoptic 12/5/2012 | 1:34:42 AM
re: Cisco May Pocket Procket "Fifty really sharp engineers can bring a product to market quicker than 500 can, so if ever there is a talent acquisition that makes sense to me in the market, I don't hesitate," Chambers told investors at a Bear Stearns conference in New York.

Is it just me or did John Chambers' just diss his entire HFR development team?? He can't be particularly pleased about spending 6 years and the better part of a billion dollars on a project which elicited a massive yawn from customers and will take another 2+ years to complete. Competitors running circles around Cisco in terms of time-to-market. The big question is what Cisco can/will do about it.

my0ptic
Dindon 12/5/2012 | 1:34:43 AM
re: Cisco May Pocket Procket "Fifty really sharp engineers can bring a product to market quicker than 500 can, so if ever there is a talent acquisition that makes sense to me in the market, I don't hesitate," Chambers told investors at a Bear Stearns conference in New York."

Chambers just admited that he has 500 non-sharp engineers build routers, did he? Or is just my impression?

Good explanation why Cisco delayed HFR launch for so long time and will take another decade to make CRS-1 realy available as carrier grade platform.

Sharp engineer may want to work for startup, away of political decision, rather than discuss on what need to be done to keep revenue in legacy platform that customers still spend money on. Most of the time the decision is to delay new products in order to keep those revenues... Sharp engineer will want this invironment? I daught...
liang 12/5/2012 | 1:34:47 AM
re: Cisco May Pocket Procket agreed.

Just wandering what's in the CTO's mind, and what's in the field engineer's mind might be different.

Come to the final purchasing decision, sometimes politics plays a big part
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