Cisco Set to Acquire Optical Chip Maker Luxtera

Cisco is poised to buy privately held Luxtera, a California-based optical chip maker, for $660 million, the networking giant announced Tuesday. The news comes about one week after reports of negotiations between the two companies first surfaced.

Bloomberg reported that Cisco beat out rivals Intel and Broadcom in its bid to acquire Luxtera, a company on the forefront of silicon photonics and a supplier of optical transceiver devices for deployment in large-scale data centers and mobile infrastructure.

Cisco’s David Goeckeler

“With Cisco’s 2018 Visual Networking Index projecting that global Internet traffic will increase threefold over the next five years, our customers are facing an exponential demand for internet bandwidth,” said David Goeckeler, executive vice president and general manager, networking and security business at Cisco. “Optics is a fundamental technology to enable this future. Coupled with our silicon and optics innovation, Luxtera will allow our customers to build the biggest, fastest and most efficient networks in the world.”

Cisco’s VNI reports that overall IP traffic is expected to grow to 396 exabytes per month by 2022, up from 122 exabytes per month in 2017, a CAGR of 26 percent.

Cisco’s interest in Luxtera is twofold: to future-proof networks for emerging applications and to expand its 100GbE and 400GbE portfolio.

The emerging class of distributed cloud, mobility and IoT applications is creating an unprecedented strain on existing communications infrastructure. The combination of Cisco’s and Luxtera’s capabilities in 100GbE/400GbE optics, silicon and process technology will enable customers to build future-proof networks optimized for performance, reliability and cost, the company said. And as system port capacity increases from 100GbE to 400GbE and beyond, optics plays an increasingly important role in addressing network infrastructure constraints, particularly density and power requirements.

With the recent talk of Cisco’s transition to a software company, Rob Salvagno, vice president of corporate business development at Cisco wrote in a blog, “It goes without saying that world-class hardware, coupled with our investment in silicon and optics, is at the heart of our intent-based networking strategy, enabling networking and security at scale powered by analytics.”

The acquisition is expected to close before the end of March – Cisco’s fiscal third quarter 2019 – subject to customary closing conditions and required regulatory approvals.