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Optical/IP

Cisco to Pay $89M for Procket Assets

As anticipated, Cisco Systems Inc. today announced it will buy the key engineering staff and entire intellectual property portfolio of core router vendor Procket Networks Inc. in a cash deal worth $89 million (see Cisco Acquires Parts of Procket and Cisco/Procket Deal Imminent).

Cisco isn't providing any further detail at this point, but a spokesman notes that it "isn't going to buy the company lock, stock, and barrel. We won't acquire any products. We'll buy the IP and Procket's talented engineering team."

But Cisco isn't taking on all of Procket's engineers. The spokesman says there's no breakdown of who is or isn't joining Cisco's Routing Technology Group, which is managed by senior vice presidents Prem Jain and Mike Volpi.

There's also no further detail on what the "select assets" referred to in the news release are, though again the spokesman presses the point that these will not include any Procket products. He adds that Cisco will not assume any of Procket's liabilities.

In its official release, Cisco notes that the "purchase will add a rich intellectual property portfolio and a team of proven silicon and software architects to Cisco's industry-leading routing technology and products."

Volpi is quoted as saying: "The addition of Procket's engineering team to Cisco offers a unique opportunity to accelerate development of silicon and software across Cisco's next generation routing portfolio. Procket has some of the world's foremost designers of sophisticated silicon, software, and network systems with an average of over 15 years of experience in their respective industries. Adding this talent to Cisco's world-class engineering team will help drive continued innovation in network infrastructure, and that is good news for our customers and the industry at large."

Cisco recently unveiled its own core router after years of stop-start development (see Cisco Unveils the HFR). It's no doubt worth $89 million to Cisco simply to take out a potential competitor.

The deal is subject to standard acquisition conditions and regulatory approval, and is expected to close in the first quarter, ending in October, of Cisco's 2005 financial year.

In pre-market trading this morning, Cisco share price was down by 30 cents, or 1.3 percent, to $23.58.

— Ray Le Maistre, International Editor, Boardwatch

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Neophone 12/5/2012 | 1:34:11 AM
re: Cisco to Pay $89M for Procket Assets it's true now that HFR is a poor product ..
because cisco buy procket.
diag_eng 12/5/2012 | 1:34:10 AM
re: Cisco to Pay $89M for Procket Assets I hope LR will now focus on real startup companies who've actually achieved something.

I'd like to read stories about startups who are actually generating revenue and have raised much less than $100 in VC money.

I'm tired of reading about companies who've raised $200M-$300M in VC money and have nothing of any REAL value to show for it. And do give me any BS saying the Procket product required that much in funding.
mrcasual 12/5/2012 | 1:34:08 AM
re: Cisco to Pay $89M for Procket Assets I'm tired of reading about companies who've raised $200M-$300M in VC money and have nothing of any REAL value to show for it. And do give me any BS saying the Procket product required that much in funding.

I'm not saying that it's the right business model, but if you look at the number of customs ASICs and other stuff that Procket had to develop in the timeframe that they did it, $200M+ is about what it takes.

Big ASIC teams and the associated CAD tools, mask costs, etc are NOT cheap by any metric. Factor in mechanical design and all the S/W needed and it's pretty easy to spend that much.

Could they have spent less? Sure they could have. Could they have developed what they did, in the same amount of time, and spent less than $150M? No way.

Doom 12/5/2012 | 1:34:07 AM
re: Cisco to Pay $89M for Procket Assets Amazing how cheap Cisco is getting the team for.
I feel sorry for the guys joining a boring big company without making any money in return.

But I have Cisco stock and like seeing the company positioning itself to be the one and only leader in this business.
gotman 12/5/2012 | 1:34:06 AM
re: Cisco to Pay $89M for Procket Assets Can you tell me what this has to do with HFR?
These engineers will most likely be working on anything but HFR...
change_is_good 12/5/2012 | 1:34:05 AM
re: Cisco to Pay $89M for Procket Assets what happens to products, support, installed base, etc...?
run_lola_run 12/5/2012 | 1:34:05 AM
re: Cisco to Pay $89M for Procket Assets So it's a good thing to blow through $200M+ and at the end of the day, all you get is $89M??

I think you would be better off taking the $200+ and buying all the lottery ticket you can.

mrcasual 12/5/2012 | 1:34:02 AM
re: Cisco to Pay $89M for Procket Assets So it's a good thing to blow through $200M+ and at the end of the day, all you get is $89M?

Not sure if this was directed at my reply, but the obvious answer is no.

The $200M+ was the result of the bubble. At the time, almost everyone believed that they would IPO or be acquired for a gajillion dollars. The bubble burst, valuations crumbled, etc.

However, getting $89M, jobs for some of the people, and pieces of the technology surviving is better than nothing.
routingfool 12/5/2012 | 1:34:02 AM
re: Cisco to Pay $89M for Procket Assets Now that Cisco has made its move, whats Juniper, Avici, Nortel, Lucent, Alcatel, Foundry, Extreme, etc up to. Who else is going to get into the batter's box and make a hit or atleast make some news. We need some excitement to get these stocks moving.

- RFool
nyc 12/5/2012 | 1:34:02 AM
re: Cisco to Pay $89M for Procket Assets They go bye bye... Cisco is not buying the product or their liabilities seems to me like they are solely aquiring their talent and some intellectual Property..

Good deal for Cisco... I dont think that there is enough of a market for much more than the two dominant players in the core router market...

Investing 300M in a startup to go after the core router market is not a good idea.. and it is proven by the fact that you can pretty much walk away with that investment a few years later for a measly 89 Mil..
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