Cisco Systems to acquire PipeLinks
The networking giant buys a maker of high-capacity routers and expects a one-time charge in the second quarter of 1999.
Cisco is hoping the acquisition will further enable it to offer integrated network services for data and voice.
In connection with the acquisition, Cisco expects a one-time charge against after-tax earnings between 3 cents and 6 cents per share for research and development expenses in the second quarter of fiscal 1999.
San Jose, California-based Cisco has been a minority investor in PipeLinks since 1997, but under the terms of the acquisition, shares of Cisco common stock--valued at $126 million--will be exchanged for all outstanding shares and options of PipeLinks currently not owned by Cisco.
With Cisco's software as a foundation, PipeLinks' technology is expected to allow telecommunications and Internet service providers to offer new services such as managed Internet access and native LAN services over an existing infrastructure.
Cisco's move comes as a larger number of service providers are switching to IP-based networks, a technology that allows greater traffic flow at more efficient rates. The company is hoping that its clients will be able to target small and medium-sized businesses in multitenant building environments with this technology.
Cisco's major competitors, including Nortel Networks, Lucent Technologies, and Ascend Communications, also are preparing for intensifying competition in this space.
Shares of Cisco fell in early trading, slipping 2.66 percent or 2.13 points to 77.63. The stock has traded as high as 80.38 and low as 31.78 during the past 52 weeks.
Prior to the acquisition-related charges, Cisco was expected to report earnings of around 36 cents per share in the current fiscal quarter, compared with 29 cents in the quarter ended January 1998, according to First Call.
The acquisition has already been approved by the board of directors of each company but is still subject to various closing conditions.
PipeLinks was founded in 1996 and has 73 employees. Its president and chief executive Amit Shah will report to Alex Mendez, vice president and general manager of Cisco's service provider division.
Reuters contributed to this report.