Cisco Systems In Talks To Acquire Optical Chip Pioneer Luxtera: Report

Cisco Systems is in talks to acquire optical chip maker Luxtera, beating Intel Corp. and Broadcom Inc. to the punch for a deal that could reach into the hundreds of millions of dollars, according to a Bloomberg report.

Negotiations between networking behemoth Cisco and Carlsbad, Calif.-based Luxtera are ongoing and private, and there's still a chance the deal may not go through, Bloomberg reported, citing people familiar with the plans.

Luxtera develops silicon photonics, which integrates fiber optics with silicon electronics. The "fiber to the chip" technology is said to greatly speed data connectivity. The company was founded in 2001. Its President and CEO Greg Young worked for both Broadcom and Intel before joining Luxtera in 2007.

Luxtera, Broadcom, Intel and Cisco did not immediately respond to requests for comment Tuesday.

Kent MacDonald, senior vice president of strategic alliances at Long View Systems, a Canada-based solution provider that works with Cisco, said the acquisition would be a well-timed and "shrewd" move by Cisco as the market continues to deal with widespread component shortages.

"I see this as a shrewd and timely investment by Cisco to accelerate innovation and create a competitive advantage in the market, especially with component supply an ongoing issue for the industry," MacDonald said.

Cisco under Chairman and CEO Chuck Robbins has made significant efforts to transition to a business model that emphasizes software and subscription-based revenue. The acquisition of Luxtera would potentially give the company a hardware performance advantage, however, as customers move toward low-cost gear and away from expensive, proprietary equipment.

"Cisco's bread and butter is still in the highest-end forms of connectivity, and with 5G on the horizon and Wi-Fi speeds now multi-Gig, speeds will continue to increase exponentially," said Ben Johnson, CEO of Liberty Technology, a Griffin, Ga., solution provider that works with Cisco.

"With the explosion of IoT, I think it's absolutely vital for Cisco to maintain their position in the core switching market and to rapidly increase switching speeds," Johnson said. "We've seen the release of 10G, 40G and even 400G switches, but even those speeds aren't enough to handle the bandwidth tsunami on the immediate horizon. I'm excited to see more investment in physical, silicon-based technology."