Cisco Systems Inc. (Nasdaq: CSCO) is close to acquiring little-known startup
Spans Logic Inc. , sources say, a deal that could put some pressure on chip vendor
NetLogic Microsystems Inc. (Nasdaq: NETL).
Still in stealth mode, Spans Logic is widely believed to be building ternary content-addressible memories (TCAMs) -- chips designed for the complex table searches performed by IP routers. Sources around the chip industry say Spans Logic's goal was to develop a cheaper TCAM, one built from commodity memory.
TCAMs were championed by Cisco in the 90s, and Cisco remains the largest customer for the parts. "You can't last long in that business if you don't have that customer," says once source in the chip industry.
It's not surprising, then, that Cisco would want TCAMs of its own. One source believes Cisco intends to integrate Spans Logic's TCAM into Cisco ASICs; another says Cisco has told its chip suppliers to begin interoperability tests with Spans Logic.
Cisco declined to comment; Spans Logic did not return a call for comment.
Should the acquisition go through, it probably wouldn't be pricey. Spans Logic has raised just one funding round of $6 million, according to a 2005
San Jose Mercury News survey. Spans Logic's spartan Website lists
ATA Ventures and
Crescendo Ventures as investors.
One chip industry source, though, says Spans Logic's primary investor is Cisco itself. The deal, then, would be akin to a spin-in, with Cisco intending all along to acquire the startup if the technology worked out. It wouldn't be the first time Cisco tried something like that. (See
Andiamo Crew Reunites With Cisco.)
The source estimate's Spans Logic's headcount at "between 15 and 30" and notes that the startup has yet to collect any revenues.
Cisco buys TCAMs from
Integrated Device Technology Inc. (IDT) (Nasdaq: IDTI) and NetLogic, but the latter would appear to have more to lose. NetLogic is said to be Cisco's primary TCAM supplier, and it gets more than 60 percent of its revenues from Cisco. IDT, meanwhile, is a Silicon Valley old-timer that sells a range of other chips to other companies, although Cisco has accounted for more than 20 percent of its revenues during each of the last three years.
But one chip industry source believes Spans Logic is targeting too low-end a niche to harm NetLogic. NetLogic's specialty is in higher-end systems that require TCAMs too sophisticated to be integrated into ASICs, whereas Spans Logic has been targeting a design for lower-end equipment, the source says.
NetLogic does have low-end chips, but those parts don't sell into Cisco, the source says.
NetLogic declined to comment.
That Cisco might look for TCAM alternatives isn't surprising. The company supposedly has asked Japanese firm
Renesas Technology Corp. , a spinoff of
Hitachi Ltd. (NYSE: HIT; Paris: PHA), to consider building TCAM cores for use inside ASICs. Asked about Renesas on earnings calls, NetLogic officials have said they aren't seeing any direct competition from the company.
— Craig Matsumoto, West Coast Editor,
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