Cisco Systems, of San Jose, Calif., said it plans to acquire ArrowPoint Communications, of Acton, Mass., a supplier of intelligent switches that speed up the delivery of Web content. The planned purchase will be an all-stock deal valued at $5.7 billion.
ArrowPoint only recently went public. The company's so-called smart switching or intelligent switching technology focuses on layer 7 switching that is much closer to applications and content than the traditional router technology that Cisco used to build its empire. Cisco representatives say that content- switching technology has become increasingly important in the marketplace. Cisco values ArrowPoint highly because its systems can look into packet flows and switch traffic based on various content characteristics.
The $5.7 billion value of the transaction is based on the $63.63 closing price of Cisco's shares Thursday.
"The combination of Cisco and ArrowPoint will be a very great powerhouse in this field," said Paul Strauss, senior research analyst at International Data Corporation, of Framingham, Mass. He said the deal would have significant impact on the market and the competition.
"This could mean a tremendous upsurge in highly intelligent switch sales to service providers," said Strauss. "It validates the market.
"Cisco was lagging technically in this area," said Strauss, who noted that ArrowPoint had put together an able management team, and had made recent advances in firmware development for intelligent switching.
The acquisition is expected to close in the fourth quarter of Cisco's fiscal 2000.
ArrowPoint's products, in combination with Cisco's Internet infrastructure offerings, will be aimed at ISPs, Web hosting companies, and others, with the goal of improving the user experience of surfing the Web, the company said. Cisco added that ArrowPoint's software features also can be integrated into its existing products.
In addition, Cisco hopes that ArrowPoint's products will help to strengthen the company's reach into markets ranging from ASPs (application service providers) and AIPs (application infrastructure providers) to dot-com companies.