Cisco Systems announced that it would acquire optical component maker Acacia Communications in a deal worth $2.8 billion. Cisco will make the payment in cash as it plans to bulk up its optical systems portfolio.
Acacia develops, manufactures and sells high-speed optical interconnect products that are designed to transform networks linking data centers, cloud and service providers. When the fifth generation network comes online, mobile networks would need higher-capacity optical fibre interfaces to handle the surge of data. Global internet traffic is estimated to increase from 4.1 exabytes per day in 2017 to 13.2 exabytes per day in 2022.
According to Morningstar analyst Mark Cash, the acquisition will bolster Cisco’s technology for service providers upgrading to 5G. Cisco’s optical portfolio was mainly for short-range data centre connections, but after the acquisition, its optical portfolio will diversify into areas such as metro, long-haul, and undersea.
Cisco’s revenue from its infrastructure platform business, which includes the production of switches and routers, increased by 5 percent to $7.55 billion in its third quarter. Cisco’s business is only expected to get a boost from 5G communication networks, but an impact is not expected prior to 2020.
According to Faisal Bhutto, executive vice president of Computex Technology Solutions, a Cisco Gold partner, said that the service provider business is really important to Cisco. Suppliers like Acacia have the next-gen technology needed to support optics and Cisco wants that intellectual property.
The acquisition is also influenced by Cisco’s growing competition with Huawei, the Chinese multinational technology company.In 2010, Cisco brought CoreOptics, a designer of digital signal processing offerings for high-speed optical networking applications. In 2012, the company acquired advanced optical interconnect technology provider Lightwire.
In 2017, Cisco bought business performance monitoring software company AppDynamics for $3.7 billion. Earlier this year, Cisco completed a $600 million deal to acquire semiconductor company Luxtera.