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Comms chips

LSI Takes Out Tarari

LSI Corp. (NYSE: LSI) is paying $85 million in cash for privately held Tarari Inc. , a maker of content- and application-aware silicon. The acquisition is meant to add more intelligence and security functionality to LSI's silicon portfolio. The deal is expected to close in the fourth quarter.

Tarari had raised more than $42 million through three rounds of funding since being spun off by Intel Corp. (Nasdaq: INTC) in 2002. Investors included Enterprise Partners Venture Capital , Crosspoint Venture Partners , Morgan Stanley Venture Partners , Miramar Venture Partners , and XMLFund.

Tarari's chips allow customers to analyze the content traveling through packets at very high speeds -- up to 10 Gbit/s and beyond. Gary Smerdon, chief marketing officer for Tarari, says his company's products "allow customers to look within packets of data within a network and do analysis of that data for a variety of reasons."

Tarari has benefited from increased interest in application and content awareness at the chip level. As a result, the chip vendor has been able to secure more than 30 customers for its products, including Cisco Systems Inc. (Nasdaq: CSCO) and Alcatel-Lucent (NYSE: ALU).

Nevertheless, the company still sees an opportunity to broaden its customer base, and being part of a company like LSI should help with that. "There are some customers that would prefer to work with an established company like LSI," says Smerdon, "and this is going to take a hurdle away as we engage with those customers."

Jas Tremblay, LSI's senior marketing manager for SMB and enterprise, sees a few places where Tarari fits right into his company's plans. Calling Tarari the "market and technology leader for deep content inspection," Tremblay says the acquisition will help equipment manufacturers add intelligence to networks and increase control of them.

Tremblay says, "We now have all the core ingredients to build up this new network, including all the media and signal processing, the leading advanced packet processing and traffic management capabilities -- and now the last ingredient to upgrade networks to the next level of intelligence is content inspection."

"Fundamentally, I think it's a good deal for both companies," says Bob Wheeler, senior analyst at The Linley Group . "Tarari had established itself as a technology leader in what is a nascent market. From a business perspective, it would be tough for them to reach profitability in the near term."

From LSI's perspective, Wheeler says, Tarari's technology "can be integrated into other products. The technology can initially be used as a co-processor but it could be integrated into a system-on-a-chip for business gateways, for instance."

— Ryan Lawler, Reporter, Light Reading

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