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Cisco Seals Deal for Storage Switch Maker

UPDATE: Cisco has closed its purchase of Andiamo Systems, paying $750 million for the storage switch maker 18 months after it agreed to acquire it.

The stock deal, first announced in 2002, launches the San Jose, Calif., networking giant into the market for intelligent switches, gear that routes data to storage networks.

The lag between the acquisition announcement and closing was due to the deal's structure. Andiamo's revenues during that time were used to determine the final price, said Jackie Ross, vice president of marketing for the Storage Business Unit at Cisco.

Ross said Cisco let Andiamo's sales cycles ramp for about a year before setting a price. The acqusition price was based on Andiamo's revenue run-rate multiplied by what Cisco was trading at.

"This was a transaction structured in such a way that Cisco would acquire Andiamo's technology and base the acquisition price on how successful Andiamo was in the market place..." Ross told internetnews.com.

Cisco, which already owned 44 percent of Andiamo, spent the last year blending the firm's assets, which are designed for high-end storage applications for large data centers, with its own IP storage products. The combination helps customers consolidate disparate storage networks into one storage area network (SAN) .

In addition to ushering in SAN consolidation, intelligent switches also increase data availability, and allow customers to better manage their storage infrastructure.

Cisco has used Andiamo's team and products to establish itself as a key player in the SAN switch space, alongside rivals Brocade and McData.

For example, Cisco has based its MDS 9000 line on Andiamo technology. Cisco last made MDS 9000 "smarter" last November and has won support from partners such as IBM, EMC, HP and Hitachi Data Systems.

Ross said Cisco is extremely pleased with the way Andiamo's products are fitting into Cisco's portfolio and described market traction as very strong.

"There is a need within the data center to move from a SAN island to consolidated SAN fabric such as intelligent switches," Ross said.

Cisco's interest in privately held firm dates to 2001, when it signed an option to acquire Andiamo, according to filings with the Securities and Exchange Commission.

Andiamo's 317 employees will join Cisco's Internet Switching Business Unit led by Luca Cafiero. Buck Gee, former CEO of Andiamo, will work to integrate the companies further and head operations.