Sycamore Networks (Nasdaq: SCMR) is the latest company to beef up and tackle the hot fiber optic metropolitan network market. The company said Tuesday it will acquire privately held Sirocco Systems for about $2.9 billion in stock.
The deal comes just a week after Lucent Technologies (NYSE: LU) bought Chromatis Networks in a move to keep up with Nortel Networks (NYSE: NT) and Cisco Systems (Nasdaq: CSCO). Chromatis was also a player in the metropolitan networking space.
Metro optical networking systems are bridges that move Internet, data and voice traffic from the larger network "core" to commercial office complexes and residential customers living in high-rise buildings. Metro networks consolidate traffic onto urban beltways.
Sirocco, based in Wallingford, Conn., develops and markets optical access aggregation, switching and network management products targeted for the metropolitan access market.
In a statement, Sycamore Networks said the deal, expected to close in the company's first quarter, will be accounted for as a pooling of interests. Sycamore said the acquisition of Sirocco will beef up its product and services portfolio.
Jonathan Reeves, Sirocco's president and chief executive, will become vice president and general manager of Sycamore's new optical access division, reporting to Dan Smith, Sycamore's CEO. Sycamore added that all of Sirocco employees will become its employees.
As is the norm with many of these fiber optic acquisitions, Sirocco isn't shipping products yet. Sirocco's first products are expected in the fourth calendar quarter.
But that hasn't stopped companies for paying billions for the young and revenueless. According to Pioneer Consulting , the market for global optical networking edge gear market is expected to grow to $17.3 billion by 2004.
Cisco recently acquired Qeyton Systems for $800 million to fill in its metro network lineup. Last year, Cisco gobbled up Cerent and Monterey Networks before they had a chance to go public.
Nortel has also been busy, buying CoreTek, Xros and Qtera to name a few.
Analysts said the metro network buildout is still six to 24 months from becoming reality. In fact, most metro products are still in the evaluation phase. Qwest Communications (NYSE: Q), Global Crossing (Nasdaq: GBLX) and Williams Communications (NYSE: WCG) are among the firms evaluating gear from recently acquired startups.
Sycamore competes with Cisco, Nortel, Lucent and Ciena (Nasdaq: CIEN).