Cisco Buys Acacia for $2.6 Billion to Add Optical Technology

Cisco agreed to buy Acacia Communications for about $2.6 billion, according to Bloomberg. It is the technology giant’s latest acquisition as it seeks technologies to meet customer demand for more robust networks.

Cisco will pay $70 a share, a 46% premium to Acacia’s closing price on Monday, the companies said in a statement. The purchase price is about $2.6 billion on a fully diluted basis net of cash and marketable securities, and the deal is expected to close in the second half of Cisco’s fiscal 2020 year.

Cisco has recently rekindled growth by revamping existing products and adding new software and services under a corporate makeover by CEO Chuck Robbins. In May, the company gave a bullish sales and profit forecast for the current period, a sign that corporations continue to spend on computer networks despite the trade dispute between China and the U.S.

Cisco’s latest acquisition makes chips and machines that help translate optical signals into electronic data. Acacia’s products are used to speed the flow of information around data centers and telecommunication networks. The new capabilities may help Cisco make more headway selling gear to hyperscale data center owners such as Amazon and Google, the company said in a presentation.

During a conference call after the deal’s announcement, analysts questioned whether that will be possible as those competitors may balk at buying from Cisco. Acacia’s customers include Nokia, Huawei and ZTE, and Cisco accounts for about 18% of its revenue. Bill Gartner, the head of Cisco’s optical business, said the deal allows the companies to more closely integrate their technologies and offer customers simpler solutions. “We feel like having this technology in-house is the best way to do that,“ Gartner said.