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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mr zippy 12/5/2012 | 1:35:54 AM
re: Cisco May Pocket Procket Tony - Li(ar)

Overdesigner, overpriced and no-sustainable market.

I'm no lawyer, however I'd suggest Truelight1 that you would be getting close to the point of receiving a lawsuit for comments like this one, especially in letigeous America.

Demonstrate the courage to come out from behind your pseudonym, if you are going to make such comments.
t_jones 12/5/2012 | 1:35:53 AM
re: Cisco May Pocket Procket Heh. Tony must be flattered to have a troll that's obsessed with him. And an anonymous troll at that. :-)
arch_1 12/5/2012 | 1:35:53 AM
re: Cisco May Pocket Procket BobbyMax! we are so happy you have chosen to rejoin us!

This give me another oportunity to make sure LightReading's "Ignore author" button still works...
coreghost 12/5/2012 | 1:35:52 AM
re: Cisco May Pocket Procket This is clearly a stop gap acquisition &#8211; as CSCO doesn&#8217;t really have a deployable product for the next 18 months &#8211; deploying the 128xx would result in a complete $ write-off within month &#8211; JNPR will eat Cisco&#8217;s lunch and this acquisition positioned as an &#8220;asset acquisition&#8221; is an admission of where the CRS-1 stands today vis-+á-vis the T-640.

I don't agree. If this is all true, it would
be more likely that procket would be used to
shore up other areas of the product line where
cisco has aging equipment. I think the use of
it as a core product by cisco is unlikely. But
in other roles (with all the software thrown
away), it might be of use.

see_the 12/5/2012 | 1:35:50 AM
re: Cisco May Pocket Procket Hmmmmm....

Everyone is asking what does Cisco see... Certainly, it is neither the customer base nor the employees at $80M. Cisco could give a fraction of that money directly to either the customers or employees, and make more progress.

It must be the intellectual property...

System: The problem is that they would have 3 software platforms Cisco IOS, CSR, and Procket.

40G NPU: Not likely since they just built one with IBM unless they are trying to corner the market on 40G processors.

Switching architecture: Again, not likely because it is hard to reintegrate hardware back into an existing hardware platform.

OS and Protocol Software: Of the above, this is the more likely. This implies that the CSR software is not the long term strategy... Or, a battle could be shaping about which software platform is ported onto new hardware platforms.

Anyway, Cisco only bought the assets.... Who bought the liabilities!?!?!

It reminds me of the Polish accountant who embezzled the liabilities of the company... Maybe, it was the Nortel accountant!!??! ;-)
startup_shutup 12/5/2012 | 1:35:47 AM
re: Cisco May Pocket Procket ... unless you get to make decisions technical
or administrative. Otherwise you have got
everything to lose. Do not chase mirrages, wait
for the next wave.
pig3head 12/5/2012 | 1:35:47 AM
re: Cisco May Pocket Procket I think cisco's aggressive rivals like huawei have eyed on Procket for that they have not opportunity to catch up with cisco's high end router technology after the CRS-1's coming true.

Few in the world can offer 40G and modular OS. No doubt, announcement for CRS-1 in cisco's D-day spoil cisco's competitor's confidence to catch up.

As we know, huawei's hatch of new core router has taken so long the time that it must oemed box from AVICI.

Avici's list in stock market make it hard for huawei to acquire it. Therefore, private-hold Procket is the best choice.

Procket's IPs about 40G and modular OS are just what huawei want.

After learning this, cisco decides to acquire Procket immetiately to protect self.

I think that the leading actor are not just cisco and Procket, certain 3th part must be involved.

All thses were caused by CRS-1.
diag_eng 12/5/2012 | 1:35:44 AM
re: Cisco May Pocket Procket If Cisco is buying Procket, which I doubt, then it's most likely a tactical move intended to prohibit another competitor (Alcatel, NT, etc.) from acquiring them. Cisco did this in the early-to-mid stages of the bubble by acquiring small software companies developing routing code, e.g. GateD.

What would be the compelling reason(s) for a Cisco buyout of Procket?

1. Tactical (see above paragraph)
2. HFR is a toilet

If you can think of any other reasons, then please post them.
signmeup 12/5/2012 | 1:35:41 AM
re: Cisco May Pocket Procket This is purely a defensive buy for Cisco. They saw an opportunity to remove a potential competitor for very little $$$. They will kill the product and offer HFR replacements to those poor customers that were early adopters of Procket.

What remains to be seen is if Cisco uses any of the technology or if they just scrap it in favor of what they already have. My bet is that the 'not invented here' syndrome wins in the end and all that will be left of Procket is a handful of patents and fond memories of the bubble...
wilecoyote 12/5/2012 | 1:35:39 AM
re: Cisco May Pocket Procket Well, I can think of 60 reasons for Cisco to buy Procket. Juniper basically listed them: all the customers who were waiting for HFR and now going with T-640. Those 60 customers will probably acount for about 300-400M in sales over the next 2-3 years. Say what you want about Procket but the fact is, the box works and people are buying it. Cisco needs something people can use right now, as opposed to 18 months from now when CSR 1 is done being tested (best case).
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