Cisco Endorses Internet Telephony

Cisco Systems Inc. Tuesday added another
communications firm to its fleet by grabbing voice-over-IP device provider
Komodo Technology Inc. for $175 million
in stock.

The deal expands a relationship began in March when Cisco took a 10.5 percent stake in the company. In connection with the acquisition, Cisco
expects a one-time charge of up to 2 cents a share on an after-tax basis for
purchased in-process research and development expenses.

Komodo is a leading developer of VoIP devices, which allow analog telephones
to place calls over IP-based networks. This acquisition strengthens Cisco’s
service provider solutions by offering a smooth transition path from
traditional circuit-switched networks to new packet-based networks.

An analog phone can be connected directly to Komodo’s product, which
connects via an internal modem to a standard telephone line or via an
Ethernet jack to a broadband access device.

The play aligns with Cisco’s New World strategy to offer service providers a
solution for providing integrated data, voice and video services over a
single Internet-based network.

The 25 employees will be led by Komodo Chief Executive Officer Jan Fandriato
and will join the Packet telephony division in Cisco’s service provider
business led by Senior Vice President Kevin Kennedy.

This acquisition will be accounted for as a purchase and is expected to be
completed in the first quarter of Cisco’s fiscal year 2001.

For Cisco, Tuesday’s purchase corresponds with major deals its top two
networking rivals, Nortel Networks and
Lucent Technologies Inc. made this week.

Lucent Tuesday bought switching provider Spring Tide Networks in a stock
deal worth $1.3 billion to boost its product offerings.

On Monday, Nortel inked a multi-year $2 billion broadband
equipment contract with telco giant British
Telecommunications Plc.

However, unlike the plays made by its rivals, Cisco has deviated from adding
solely switching or optical networking product firms to its fleet. Two weeks
ago, the giant pumped $100 million into Liberate Technologies Inc. in acquiring
about 4 percent of the interactive TV firm.

The two firms said they would work to extend IP-based services to support TV
set-top boxes. Tuesday’s purchase of Komodo may prove itself useful to this
end.