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Cisco to buy Altiga and Compatible for $567 million

Cisco Systems, Inc. (Nasdaq: CSCO) said Wednesday it will buy privately-held Altiga Networks and Compatible Systems for stock worth $567 million to enhance its New World VPN (Virtual Private Networks).

Shares were down 1/2 to 11 1/2 Wednesday morning. The stock has been rising on an even steeper curve than usual, as the company which continually exceeds expectations is looking even better compared to rival Lucent (Nasdaq: LU). Lucent recently announced a profit warning.

VPNs provide secure network connections on a public infrastructure, giving telecommuters, mobile users and remote offices remote access. VPNs benefits to enterprise customers include lower costs of ownership and infrastructure investments, and simplified wide area network (WAN) operations. For service providers, VPNs offer an opportunity to differentiate their business, increase revenues and reach new customers.

Altiga, with its expertise in VPN products for remote access applications, will add to Cisco's VPN portfolio by improving enterprise applications such as service provider-managed remote access. Altiga CEO Mark Freitas will join Cisco's enterprise unit.

Compatible, which provides VPN products for service provider networks, will add to Cisco's ability in VPN services. Compatible CEO Matt McConnell and will become part of the service provider line.

Under the terms of the acquisitions, to be accounted for as a pooling of interests, Cisco common stock worth $567 million will be exchanged for all outstanding shares of Altiga and Compatible. Both acquisitions have been approved by the boards of directors and the deal is expected to close in the third quarter of Cisco's fiscal year 2000.

Cisco Systems Inc. (Nasdaq: CSCO) has been beefing up with several purchases over the last 6 months. It bought Aironet Wireless Communications (Nasdaq: AIRO) in November for about $799 million, and Cerent Corp. and Monterey Networks Inc. for a combined $7.36 billion in stock last August.