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Cisco Pays $7.4 Billion for Cerent, Monterey Networks

Infrastructure company Cisco Systems, Inc. Thursday acquired networking companies Cerent Corp. and Monterey Networks, Inc. for a combined $7.4 billion in stock.

The acquisitions were made to strengthen Cisco's hold on the Internet infrastructure market, specifically optical transport.

Cerent's only product is the Cerent 454, a box that organizes and compresses voice, data and video to vastly increase the size of the pipe through which that information is sent.

Monterey Networks makes "cross-connect" technology made to boost network capacity at the core of an optical network. Cisco said it would integrate the two companies as business units within its Transport Group.

Cisco (CSCO) will exchange 100 million shares of its common stock, worth approximately $6.9 billion, for all outstanding of Cerent. The Monterey agreement calls for 7.3 million shares of Cisco common stock to be exchanged for all outstanding shares of Monterey, valued at approximately $500 million.

"Cerent and Monterey strengthen Cisco's optical internetworking strategy to enable a more complete transport solution through Internet architecture," Cisco said in a statement.

In July privately-held Cerent announced it was raising money to prepare for an initial public offering. There was no word on the future of those plans.