Cisco and Acacia Communications announced on Tuesday they have entered into a definitive agreement under which Cisco has agreed to acquire Acacia. Under the terms of the agreement, Cisco has agreed to acquire Acacia for $70.00 per share in cash, or for approximately $2.6 billion on a fully diluted basis, net of cash and marketable securities.

Acacia designs and manufactures high-speed, optical interconnect technologies that allow webscale companies, service providers, and data center operators to meet the fast-growing consumer demands for data.

According to Bill Gartner, the head of Cisco’s Optical Systems and Optics business, Acacia’s coherent optics technology empowers webscale companies, service providers and data center operators to meet the fast-growing consumer demands for data. Acacia brings industry-leading expertise and innovation in all the key technology areas for coherent optics applications – algorithm development, ASIC design and verification for the Digital Signal Processing (DSP), RF design and module packaging/ integration. In addition, Acacia uses silicon photonics as the platform for integration of multiple photonic functions for coherent optics. The greater levels of integration increase the density and reduce the cost of the coherent optics. Leveraging the advances in silicon photonics, each new generation of coherent optics products has enabled higher data transmission rates, lower power and higher performance than the one before.

Cisco offers a full portfolio of optical systems to support webscale, service provider, enterprise, and public sector customer segments. These optical systems address performance, power, and cost requirements. Acacia’s technology will enrich Cisco’s optical systems portfolio. It will also allow the growing number of customers transitioning from chassis-based systems to pluggable technology to simplify operations and reduce network complexities. 

“Coherent technology has been a game-changer for optical networking and continues to evolve with the deployment of pluggable coherent optics,” said Raj Shanmugaraj, president and chief executive officer, Acacia. “Upon close, Cisco and Acacia will continue to serve and support existing Acacia customers. By integrating Acaciatechnology into Cisco’s networking portfolio, we believe we can accelerate the trend toward coherent technology and pluggable solutions while accommodating a larger footprint of customers worldwide.”

Acacia is an existing supplier of Cisco. In 2018, Cisco accounted for 14% of Acacia's revenues. 

For example, CISCO's latest product for DCI, optical backbone and subsea cable applications, the Network Convergence System NCS1004, is powered by Acacia’s Pico Digital Signal Processor chip. The NCS 1004 offers the flexibility to optimize for higher wavelength capacity or for fiber efficiency to support a wide range of customer applications. Cisco NCS 1004 can transport any trunk rate between 100 and 600-Gbps wavelengths on the same platform through software provisioning. With 64 channels of 600G DWDM at 75Ghz, the NCS 1004 provides 38.4Tbps in 16RU, unparalleled scale and density.

It is said Cisco will need regulatory approval from China as ZTE is a key Acacia customer. The current state of US and China’s trade talks may pose a risk to this closing. Cisco believes the regulatory approval process shouldn't be an issue. 

The acquisition is expected to close during the second half of Cisco’s FY2020, subject to customary closing conditions and required regulatory approvals.