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Cisco Takes Two for $258 Million

Angling to bolster its already broad array of Ethernet products, Cisco Systems, Inc. Wednesday purchased privately-held Hammerhead Networks, Inc. and Navarro Networks, Inc. for a combined $258 million in stock.

In the purchase of Billerica, Mass.'s Hammerhead Networks, for which it will exchange $173 million in stock, Cisco hopes Hammerhead's software will augment its IP aggregation portfolio consisting of cable, broadband and leased-line products. Hammerhead, in whom Cisco already owns a minority stake, makes software that speeds up IP services such as billing, security and Quality of Service (QoS).

The 85 employees of Hammerhead Networks, led by chief executive officer, Eddie Sullivan, will join the Cable Business Unit in Cisco's Network Edge and Aggregation Routing Group.

Cisco has pledged to buy Plano, Texas' Navarro Networks, in whom it owns a minority stake, for $85 million in stock. Cisco main interest in the network chipmaker is its ASICs design expertise. In contrast to PC-powering integrated circuits, ASICs (application-specific integrated circuit) are designed for a special application, such as a particular kind of transmission protocol. Cisco hopes Navarro's technology will help it create new, high-end ASICs for Ethernet switching platforms.

Led by CEO Mark Bluhm, the 25 staffers of Navarro will join the Internet Systems Business Unit in Cisco's Internet Switching and Services Group.

The deals are hardly a surprise, given what the smaller firms can offer to Cisco. Moreover, Cisco detailed the possible purchases in its 10-Q SEC filing for the second-quarter of fiscal year 2002.

Due to the acquisitions, Cisco expects a one-time combined charge for purchased in-process research and development expenses not to exceed $0.02 per share. The acquisitions have received all required approvals of each company and are subject to various closing conditions and approvals.

The deals are expected to close in the fourth quarter of Cisco's fiscal year 2002.