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Cisco buys MaxComm, invests in Akamai

The leading Internet equipment maker agrees to buy closely held MaxComm Technologies for $143 million in stock, and takes a stake in Akamai Technologies.

Cisco Systems' Internet acquisitions this week help shore up its strategy of building equipment that combines voice, video and data over a single Internet-based network.

Cisco, the No. 1 maker of Internet equipment, today spent $143 million to buy MaxComm Technologies, whose product lets consumers with high-speed Internet access add phone lines without having to install new wires in a home.

In a $55 million deal Monday, the networking giant purchased Calista, a company that specializes in Internet Protocol-based PBX systems. A PBX is an in-house telephone switching system that connects phones in an office with an outside telephone network.

Cisco's two acquisitions and Lucent Technology's $1.7 billion purchase today of switching company Excel Switching are some of the latest moves in the industry race to provide cheaper services by combining voice and data on one common network.

Cisco's deals help it enter two emerging markets: home networking and the IP-based PBX market.

As part of its home networking strategy, Cisco plans to install MaxComm's technology into its DSL and cable modems. The technology will allow service providers, such as US West, to use high-speed Internet access pipes to provide up to four additional phone lines in the home, said Ammar Hanafi, Cisco's business development director.

"With high-speed Internet access, you can run additional voice lines over the same connection," he said.

The Calista technology will create a bridge between old and new voice technologies, Hanafi said. If a business wants to buy an IP-based PBX in the future, Calista's technology will allow businesses to use their existing phones rather than buy new Internet phones.

"They've already spent thousands of dollars on their phones and this protects their investment," he said.

Forrester Research analyst Charles Rutstein said the MaxComm purchase makes sense. "They want to provide Internet-based telephony, but they don't want their customers to ditch their existing infrastructure. This is a bridging type of technology."

Lucent's purchase of Excel Switching today does the same for Lucent's customers, Rutstein said. The Excel technology will allow Lucent customers to bridge voice technology to work with data networks, he said.

Separately, Cisco today said it paid $49 million for a 4-percent stake in closely held Akamai Technologies as part of an agreement to develop technology that will increase the speed and reliability of Internet sites.

Akamai, based in Cambridge, Massachusetts, works with Web-site operators such as Yahoo to make them run faster and handle large amounts of traffic. It is also working with Cisco to broadcast a fund-raising concert on the Internet in October.

Rutstein said the investment simply helps Cisco sell more hardware. "Anything that makes the Internet a more fun place to be will help Cisco sell a lot of routers," he said.

MaxComm, based in Chelmsford, Massachusetts, has 35 employees and was founded last year. Cisco expects to take a charge of as much as 2 cents a share in its fiscal first quarter, which ends in October, for research and development expenses related to the MaxComm acquisition.

The purchase of MaxComm is Cisco's eighth this year. The company plans to make a total of 12 to 15 acquisitions this year, Hanafi said.

Bloomberg contributed to this report.