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Cisco Moves to Europe with Pirelli Buy

Networking giant Cisco Systems Inc. continued its torrid acquisition pace, snapping up Italy's Pirelli S.p.A., a maker of optical component systems, for $2.15 billion in stock.

With the buy, Cisco plans to enter the dense wave division multiplexing market. The technology uses light waves of different colors to increase the capacity of broadband networks carrying voice, video and Internet traffic.

Cisco expects to record a one-time charge between 3 and 9 cents a share in the third quarter of fiscal year 2000 to pay for the Pirelli buy. The deal has already been approved by both company's boards.

Also, Cisco announced plans to invest $100 million in Pirelli's optical components and submarine optical transmission systems units.

Cisco will integrate Pirelli's optical products into technology acquired with the purchases of Cerent, Moneterey Networks and Pipelinks. Cisco said the purchases will allow it to immediately ramp its optical networking product line.

"Pirelli's optical business delivers innovative technology and systems from an early stage company and provides Cisco with additional European channel and sales support. With this capability, Cisco becomes the only company in the world capable of delivering an end-to-end 10 gigabit Internet-based optical network," said Don Listwin, executive vice president of Cisco's service provider and consumer units.

The Pirelli buy will also allow Cisco to increase its sales and support presence in Europe.