Cisco buys Aironet for $799 million

2 min read

With its earnings report on deck, Cisco Systems Inc. (Nasdaq: CSCO) announced it was beefing up with another big purchase. Cisco said Tuesday it will buy Aironet Wireless Communications (Nasdaq: AIRO) for about $799 million to improve wireless access for its business customers.

Meanwhile, rival Nortel (NYSE: NT) also attempted to steal some of the spotlight Tuesday with a competitive joust in the networking field.

Cisco shares closed at 75 5/16 Monday, approaching their 52-week high after a steady climb. Aironet shares closed at 43 1/4, up considerably from the company's IPO, which saw shares dip below their offering price of $11.

Under the terms of the acquisition, each share, option and warrant of Aironet Wireless Communications will be converted to 0.637 shares of Cisco common stock. Based on Cisco's closing price of 75 5/16 November 8, the deal is worth about $799 million.

Cisco's purchase of Aironet, which makes high-speed wireless LAN products, will give its business customers wireless capabilities that act as extensions to existing local area networks. The move should give personal computer users a wireless network connection that will work anywhere throughout a building.

Cisco has been buying its way into many hot fields. The company also acquired WebLine Communications for $325 million in stock in September to bolster development of its open software platform for enterprise and service provider customers.

But as Cisco beefs up, so does the competition. In a full-frontal assault against Cisco, rival communications gear maker Nortel announced Tuesday it was slashing router prices and making Internet networking technology work with all types of systems. Nortel also said it was allying with chip maker Intel Corp. (Nasdaq: INTC) to add elements of this new open Internet platform to Intel's Internet products.

In connection with the Aironet acquisition, Cisco said it should have a one-time charge of between 3 and 8 cents a share for purchased in-process research and development expenses in the third quarter. The acquisition has been approved by both companies' boards of directors.

Aironet Wireless Communications also makes wireless bridge products that provide point-to-point or point-to-multipoint connections among buildings, and has customers including Dell, Ford, HP, IBM, Microsoft and Sears.

Cisco is also slated to report earnings after Tuesday's bell. First Call is expecting it to have earned 23 cents a diluted share, compared to 17 cents a share a year earlier.