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Cisco to buy American Internet

The networking kingpin says it agreed to acquire privately held American Internet of Bedford, Massachusetts for $56 million in stock.

Cisco Systems continues to go the acquisition route to purchase the technology it needs to compete in developing markets.

The Internet networking provider today said it has agreed to acquire privately held American Internet of Bedford, Massachusetts, for $56 million in stock.

Cisco previously had licensed technology from American Internet as part of its plans to address the emerging market for policy-based network management software.

It said it expects to incur a one-time after-tax charge of 3 cents to 6 cents per share presplit against earnings in its first fiscal quarter, stemming from the purchase. The company's fiscal first quarter ends in October.

The company recently announced a three-for-two stock split effective September 15. "The major shareholders of AIC have signed irrevocable proxies in support of the acquisition," a statement said.

As a result of the deal, Cisco will acquire technology that provides management of Internet addresses, a growing requirement for networks of large size. For example, the software can be used to set up policies based on particular groups of users, a key differentiator for service providers looking to deploy a variety of services.

The acquisition is expected to be completed by the beginning of October and is subject to certain closing conditions, the statement said.

Cisco said the American Internet software will fit right into the company's strategy to add network services to its Internetworking Operating System (IOS) package. American Internet, which was founded in 1995, has shown particular strength in catering its products to particular vertical markets, such as cable service providers, according to Kurt Dahm, senior product manager for Cisco.

"This is something we've been calculating for some time," Dahm said.

American Internet's 50 employees will move to Cisco's Chelmsford, Massachusetts campus with current CEO Bob Brennan continuing to lead his team as part of Cisco's service provider line of business. "It would be really hard to match the benefits of being a part of Cisco," Brennan said.

News.com's Erich Luening and Reuters contributed to this report.