Cisco buys VPN maker for $US181M

Cisco buys VPN maker for $US181M

Cisco Systems will acquire Allegro Systems, a VPN (virtual private network) developer, in an all-stock transaction valued at US$181 million, Cisco announced last week.

Cisco has targeted the privately held company for its VPN acceleration and security technologies, which will be used to build Cisco's current VPN and security products, accroding to a statement released by Cisco.

Cisco will use the Allegro Systems technology and personnel talent to make it more secure for Cisco's corporate customers to connect their employees and customers remotely over corporate networks and the Internet, Cisco said. Specifically Allegro technology will be used to enhance the SAFE security blueprint for Cisco's Architecture for Voice, Video and Integrated Data (AVVID) network infrastructure, the company's Web site said.

The boards of both companies have approved the deal, expected to close by October - the end of the first quarter of Cisco's fiscal year 2002, the company said. Cisco already holds a minority investment in Allegro and plans to take a one-time charge for purchased in-process research and development expenses. That charge is not to exceed $0.01 per share, Cisco said.

Pending standard regulatory approval, Milpitas, the California-based Allegro Systems, founded in August 2000 and currently with 39 employees, will be folded into Cisco's VPN and security services business unit, stated Cisco. All of Allegro's employees are expected to join the Cisco unit, including Allegro's CEO Mano Murthy and its CTO Ashwath Nagaraj, Cisco said.

This is the second acquisition Cisco has made during July. On July 11, Cisco announced its acquisition of AuroraNetics, a network technology company, for $150 million in stock. This was an addition to the 23 companies, Cisco bought last year.

In an interview with the IDG News Service last week, Cisco Chief Strategy Officer Mike Volpi said the company is focusing on profitability by making its high-end routers more adaptable to broadband technologies for its corporate customers. Cisco believes its future revenue will depend on the establishment of services over broadband, such as voice-over-IP and video-on-demand, Volpi added.

The latest acquisitions are part of that long-term outlook and even in the currently difficult market conditions, Cisco continues to internally develop, partner and acquire, the company said.

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