Cisco Systems Inc., a computer-networking equipment giant, agreed to buy Linksys Group Inc., the top maker of computer-networking equipment for homes and small business, for about
$500 million in stock to expand beyond large corporate customers.
Cisco is seeking new markets to cope with declining sales to
its main customer base of large corporations. Linksys’s products
help create home and small-office networks and connect them to the
Internet.
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Home networks allow computer users to share high-speed
Internet connections, files, printers, music and photos. Some of
Linksys’ 70 home-networking products use wireless-fidelity
technology, or Wi-Fi, which allows people to share files and send
e-mails over short distances without wires.
Linksys’s sales rose 24 percent to $429 million in 2002, when Cisco’s sales totaled $18.9 billion.
“This definitely positions Cisco to take advantage of the consumer market, which is one they really haven’t penetrated,”
said Rob Siewert, an analyst with Victory Capital Management Inc., which owns 18.2 million shares of Cisco.
Cisco said the acquisition targets worldwide sales growth of
high-speed Internet connections, or broadband.
Cisco will issue common stock to buy Linksys and assume all outstanding employee stock options. The purchase is expected to
close in the fiscal fourth quarter, Cisco said in a statement.
Linksys, based in Irvine, California, was founded in 1988 and employs 308. It’s Cisco’s largest acquisition since May 2000 and
the company’s second purchase in as many days. The addition of
Linksys will probably reduce Cisco’s fiscal 2004.
Cisco said it will keep the
Linksys brand name and continue to retail the products at stores such as Best Buy Co. and Circuit City Stores Inc. This is the second acquisition for Cisco in just two days.
Cisco said yesterday it agreed to buy closely held SignalWorks Inc. for $13.5 million in stock. SignalWorks, based in Mountain View, California, develops software for Internet telephone service.
Bloomberg News
