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Agere Nabs Gigabit Ethernet Switch Concern

Communications chipmaker Agere Systems has acquired Gigabit Ethernet switch provider TeraBlaze for $21 million in stock. The deal helps complete its strategy for supplying high-speed switches to equipment providers addressing small and home office (SOHO) and enterprise-grade applications.

Agere offered roughly 6.92 million shares of stock in the deal, which valued the deal at about $21 million for TeraBlaze when the deal was announced Friday.

Despite a dearth in networking infrastructure spending over the last few years, analysts value Gigabit Ethernet switches as a highly lucrative market driven by an ever-increasing need for bandwidth as enterprise applications grow more complex. Market research firm Dell'Oro Group estimates this market will total $12 billion in 2004.

Allentown, Pa.'s Agere, a purveyor of switch-on-a-chip technology for wireless data, storage and networking applications, has been mindful of this and has devised a strategy to serve equipment providers from the SOHO level -- a market that many analysts are saying is set to blossom in the next few years -- to the larger, 48-port enterprise applications.

Agere bought Massana, a privately held provider of GbE physical layer devices (PHYs), in August 2003 to meet its goal of providing Gigabit Ethernet solutions. Agere has used Massana's TruePHY technology to create a Gigabit Ethernet single port device, the 0.13-micron ET1011.

By acquiring Cupertino, Calif.-based TeraBlaze, also a purveyor of switch-on-a-chip technology, Agere can now combine the TeraBlaze's Gigabit Ethernet switches with its TruePHY products to offer integrated PHY and switch solutions.

"We now have the core technology to deliver a broad family of PHY and switch solutions that scale from SOHO all the way to 48-port enterprise applications," said Ed Roberts, vice president and general manager of Agere's Ethernet Division in a press statement.

Specifically, Roberts said Agere is banking on a surge in Gigabit Ethernet-over-copper in the client device market will drive a rapid deployment of Gigabit Ethernet switches in the next couple of years.

Cisco Systems, Extreme Networks and Foundry Networks make up just a few of the many equipment providers targeting this space.

TeraBlaze's 16 employees will join Agere, including TeraBlaze founder and CEO Shankar Mukherjee. Agere expects to deliver switch solutions bundled with multi-port TruePHY products in the second half of 2004.