Cisco Systems is making a big play to capitalize on the growing home and small-business networking markets with a $500 million acquisition.
Cisco announced before the markets opened this morning that it will take over Linksys Group, Inc. in an all-stock deal worth some $500 million.
Linksys, which is based in Irvine, CA., is a privately held firm focused on home networking products, including wireless solutions.
The move is Cisco’s first into the consumer and small-business market.
Cisco quoted analysts reports that projected the market segment will produce $7.5 billion in revenues by 2006 — double the amount of 2002 sales.
“This acquisition is a solid example of Cisco’s strategy to broaden its end-to-end portfolio of network solutions into high-growth markets such as wireless, voice-over-IP and storage area networking,” said John Chambers, president and chief executive officer of Cisco, in a statement.
Citing growing consumer demand for broadband services, Chambers said “the home networking space has experienced mass market acceptance.” He added that Linksys ” has captured a strong position in this growing market by developing an extensive, easy-to-use product line for the home and small office.”
The latest deal comes one day after Cisco announced a $13.5 million acquisition of SignalWorks, a developer of high-quality audio over Internet solutions. Cisco already uses some of the firm’s technology in its VoIP products, a Cisco spokesperson said.
The move is part of Cisco’s ever-growing move into VoIP, a market that is expected to reach $900 million this year and $4.3 billion by 2006.
Cisco also announced an expanded stock repurchase plan of $5 billion on Wednesday, the second one approved recently by Cisco’s board. The company still is acquiring $8 billion in stock as authorized under a previous plan.
Cisco had more than $21 billion in cash and investments at the end of its most recent quarter.