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Cisco To Acquire Cerent, Monterey

Cisco Systems Inc. has reported it's agreed to acquire network transport maker Cerent Corp. for $6.9 billion in stock.

Cerent's recorded $10 million dollars of sales in two and half years and has yet to turn a profit, yet Cisco found them valuable enough for a multibillion dollar deal.

"They called me yesterday and said they had a big announcement," says Andrew Cray, telecommunications research analyst at the Aberdeen Group (www.aberdeen.com). "It's amazing how much they paid."

Cisco also agreed on a second deal to acquire networking company Monterey Networks Inc. for $500 million in stock. "[Cisco] has realized the future is optical," Cray comments.

Cerent has been bridging the gap to high available bandwidth on fibre optic networks using wavelength division multiplexing (WDM). WDM pushes the bandwidth on fibre networks to the "optical" layer where the massive amounts of bandwidth are.

By integrating its routing and switching management technology, Cisco will be able to enable "Just in Time Provisioning," the ability to provision large amounts of bandwidth to one Internet destination when it's known ahead of time that there will be a large amount of traffic going there. So when Broadcast.com decides to hold a Victoria's Secret Fashion show live using streaming technology, its ISP could provision the bandwidth needed at the specific time it's needed and then take the bandwidth back when the event is over.

Cray says this is actually possible now but without the intelligence built into the networks, it can take up to six months to implement the technology. Using Just in Time Provisioning, it could be done at the click of a button.

The new deal could also put Cisco in the optical driver seat, ahead of Lucent Technologies and Nortel Networks. Cray says Lucent and Nortel both have products that are slightly less intelligent over fibre optic cable. Up until now, Cisco has been dormant in that space. "The optical piece is so crucial that any networking vendor that wants to be involved has to do optical networking to be involved," Cray explains

How soon this technology makes it to a data center near you is unpredictable, according to Cray. It depends on how long it will take to install the fibre optic infrastructure. Cray says there's still a lot of Synchronized Optical Network (SONet) lines laid throughout metropolitan areas that need to be replaced. -- Brian Ploskina

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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