Cisco acquires network chip manufacturer Luxtera for 660 million dollars

Cisco is down $660 million to take over Luxtera Inc. The Californian manufacturer supplies chips specifically for high-speed optical networks. The deal is announced a week after it leaked that the two companies were in talks for the takeover.

This means that Cisco wins from other companies, including Intel Corp. and Broadcom Inc., who also had conversations with Luxtera. The fact that there were several parties interested in the acquisition of Luxtera is not surprising; the company has an important position in the specific segment of the network market. As this segment is becoming increasingly important, many parties were interested.

Silicon photonic chips

Luxtera is one of the leading manufacturers of so-called silicon photonic chips. These are used in data centres to convert digital information from its standard electronic form into light. In this way, information about optical cables can be transported. Photons travel faster than electricity, which means that parcels arrive at their destination faster than traditional copper wire makes it possible.

The use of this type of technology is increasing, partly because companies are looking for ways to process the growing amount of digital data more quickly. This in turn increases the demand for Luxtera’s chips. More traffic will be generated in 2022 than in the 32 years since the Internet was launched, according to Cisco’s recent VNI Forecast, writes business leader Rob Salvagno in a blog.

Responding to growth

The acquisition of Luxtera has put Cisco in a good position to meet the expected growth. Luxtera claims to be the only supplier of the silicon photonics technology with the capacity to produce millions of chips. Of course, the wide range of markets also helps in this respect. Luxtera already supplies products to companies, telecom providers and large-scale data centres.

Cisco pays the deal both in cash and in shares. The acquisition is expected to be completed by the end of April.