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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opticalwatcher 12/5/2012 | 1:34:01 AM
re: Cisco to Pay $89M for Procket Assets I suggested this back in January:

When you think about it, Cisco invested in Procket from the beginning, hoping to get a 40Gig network processor out of the deal.

When Tony Li and company decided to build the whole system, they may have been a little upset. But now they get their network processor, (tested in a system running real traffic!) for probably less than they had planned on spending in the beginning.

Great deal for Cisco. Hope the Procket employees get treated well.
tsat 12/5/2012 | 1:34:00 AM
re: Cisco to Pay $89M for Procket Assets
We live in the post-bubble world. Only news that moves stocks is earnings reports.

paolo.franzoi 12/5/2012 | 1:34:00 AM
re: Cisco to Pay $89M for Procket Assets
This will be an interesting deal from an HSR perspective. Given Cisco's position in the router business it will be amusing to see how they claim that this transaction is not anti-competitive.

romeo-foxtrot 12/5/2012 | 1:34:00 AM
re: Cisco to Pay $89M for Procket Assets The number of people that will be retained is not announced, but a 2003 LR story pegged the number of employees at 250.


1) Cisco doesn't need the execs (Cisco has these)
2) 50 or so were removed to cut burn
3) 50 or so are support, admin, manufacturing, test, etc... and therefore not required
4) 25 or so are not "top talent"

...that would leave 100-125 employees that will be kept by Cisco. Probably the number is still high, but let's be optimistic.

So here's a different twist on these numbers.

Cisco is acquiring the intellectual property, namely some "best in class" silicon and routing engineers. Therefore the only thing they are really buying is the people they will keep.

The $89M of cash being spent is therefore worth between $700,000 to $900,000 per "top" employee.

Do you think these people will see anything like this kind of money themselves? NOT!!!

So the twisted math here would lead one to conclude that if you are a top employee, at a dying company, and can get a solid majority of your "top" peers to band together with you, you would be much better off to sell yoursleves personally.

Otherwise it is the last VCs in with the highest liquidation preferences, and the lousy senior management, that get all the returns.

That is some #$&*#@ twisted math!
routingfool 12/5/2012 | 1:33:59 AM
re: Cisco to Pay $89M for Procket Assets one factor you forgot, not sure how you would put a number next to this, but you eliminate a competitor, in the long run that helps your bottomline.
stomper 12/5/2012 | 1:33:59 AM
re: Cisco to Pay $89M for Procket Assets I have never been a fan of their products, but from a business perspective this is one of the
best moves I have ever seen them make.

If we assume that the HFR is behind the Procket
gear from a stable product standpoint, then Cisco
must have been at least a bit concerned about it.
Maybe not from Procket itself, but that it would
fall into the hands of a big competitor that would
have the resouces to market it and assure
customers that they would still be around.

However, they couldn't outright buy Procket,
especially on the heels of the HFR announcement.
It would make too confusing a product mix, send
the wrong signals to customers about the HFR,
and just present too many complications from a
hardware/software development and support

By buying the people and IP, they kill the
product and protect themselves against it's
falling into dangerous hands, and at the same
time can tell customers that they are
accelerating the development of the HFR.
They were probably also able to negotiate a lower
price for just the people they wanted, paying
them more than they would have made by an outright
sale that would have been split among the entire

Cut-throat, simple, and effective.
I think Chambers should have one of those long
curly mustaches ...

reoptic 12/5/2012 | 1:33:58 AM
re: Cisco to Pay $89M for Procket Assets For Cisco to buy the assets of another routing company on the heels of the CRS-1 launch last month and the 12800 in January shows how desperate they are to put something good together. Will be quite challenging to integrate all the 3 product lines and teams and make a coherent story. Procket is one of the all time silicon valley hype stories that went nowhere. From a financial perspective, another big VC disaster with huge negative ROI.
nullpacket 12/5/2012 | 1:33:58 AM
re: Cisco to Pay $89M for Procket Assets Cisco you own the news headlines for now, however I expect Juniper marketers to announce a win soon, it shouldn't take that long to rehash an old success story
routingfool 12/5/2012 | 1:33:57 AM
re: Cisco to Pay $89M for Procket Assets you might want to read this http://nwfusion.com/edge/news/...
doesn't look like they are going to be using the Procket Routers, looks like they are interested in the ASICs and routing code
Stbl 12/5/2012 | 1:33:57 AM
re: Cisco to Pay $89M for Procket Assets
Hmmm. Incredibly smart move because they prevent the technology from falling into the wrong hands? It would be safe to assume that any company that would take a meeting was given an opportunity to buy this company. And apparently they all passed or at least didn't value it enough to step up to a modest price.

If it is for the employees it is curious to throw 70+M in cash to VCs (though it is a rounding error for Cisco).
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