At the end of December, Cisco Systems Inc. (San Jose, CA) announced an agreement to acquire the optical systems business unit of Pirelli S.p.A (Milan, Italy). The $2.15 billion purchase will fill a gap in Cisco's line of fiber-optic products and provide the company with expertise in dense-wavelength-division multiplexing (DWDM) technology. In addition, the two companies have established a corporate-level partnership under which Cisco will invest $100 million for a 10% interest in Pirelli's remaining optical components group and submarine systems group.
The acquisition will help Cisco compete with rival Nortel Networks (Brampton, ON, Canada), which agreed to buy Qtera Corp. (Boca Raton, FL) the week before. That deal gives Nortel a product that allows phone and data traffic to be sent over longer fiber distances at a lower cost.
The purchase of Pirelli Optical Systems is Cisco's first multi-billion dollar acquisition in Europe and Cisco's first entry into the DWDM market. Pirelli Optical Systems is the first company to ship open standards-based, 10-Gbit/sec (OC-192) optical transport systems, says Carl Russo, group vice president of Cisco's optical networks business unit. "The addition of 10-Gbit/sec-capable DWDM technology and solution fills out Cisco's optical networking solutions for service providers," he says. "DWDM is a required element in optical networking systems, and Pirelli's technology will provide a significant role in Cisco's strategy to help customers transition to 'new world' networks."
The combination of Pirelli with Cisco enables the company to offer an end-to-end optical networking solution for service providers. Cisco has announced the 12000 Terabit System, which includes the 12016 Gigabit Switch Router and the first OC192c/STM64 interface. The system offers scalability to 5 Tbits/sec using an advanced crossbar switch fabric architecture. (See previous story, "Cisco system to help service providers ramp to terabit speeds.") Pirelli's technology will be integrated into Cisco's current optical products, and into products and technology that Cisco has acquired from startups Cerent, Monterey Networks, and Pipelinks.
The acquisition addresses the fourth phase in Cisco's five-phase optical transport strategy and will provide Cisco with additional expertise in Europe. "With Europe and South America in the early stages of deregulation, we are finding there is a tremendous demand for high-bandwidth infrastructure," explains Kevin Kennedy, senior vice president of Cisco's service provider line of business. "Cisco's ability to take advantage of this opportunity is greatly enhanced with the addition of Pirelli's international presence, products, technology, and sales team," he says.
Cisco will obtain Pirelli Optical Systems' 701 employees located primarily in Milan, Italy; Tregastal, France; Wuppertal, Germany; and Lexington, SC. "Milan will be a key Cisco R&D [research and development] center going forth," notes Russo. The group will be headed by Pirelli Optical Systems' current chief executive officer, Geraint Anderson, and will become part of Cisco's optical product group in the service provider line of business.