RealTime IT News

Vitesse Bids $66M for Cicada in Fast Switch Play

Circuits and microchip maker Vitesse Semiconductor has agreed to acquire Cicada Semiconductor for approximately $66 million in cash, a move that strengthens Vitesse's position in the local area network switching market.

Vitesse, which makes switches that help copper and fiber optic lines interoperate, would essentially double its revenues with the deal, while positioning for what could eventually be a burgeoning Voice over Internet Protocol (VoIP) market in the years to come, as companies cut costs by integrated their voice and data networks.

Austin, Texas' Cicada makes gigabit Ethernet copper transceivers that support high-speed communications systems, making it a natural fit for Vitesse, which is looking to expand its purview in the local area network (LAN) switch market.

Vitesse expects the Cicada products to contribute about $10 million in revenues in calendar 2004, with a majority to be realized in the second half of the year as customers upgrade their networks to gigabit Ethernet speeds.

Vitesse also expects that Cicada will have reduced its workforce to about 40 employees, or 25 percent of the current staff, by the time the deal closes in the first quarter of 2004.

Lou Tomasetta, president and chief executive officer of Vitesse, proclaimed the deal a natural fit for two companies who have been jointly selling gigabit switch products that include Vitesse's LAN switches and Cicada's gigabit Ethernet copper transceivers.

"We expect this acquisition to double our revenues in the LAN switch market and to position us to gain share as the market embraces gigabit switch products," Tomasetta said in a press statement.

"The long-term prospects for voice- over-packet technology remain excellent despite the telecom downturn," said Tom Valovic, director of IDC's IP Telephony program.

Market research firm IDC believes the overall market for VoIP equipment improving and forecasts said the VoIP market will increase at a compound annual growth rate of 45 rate to reach a revenue base of $15.1 billion by the year 2007.