As part of its push to capture a share in the nascent 5G market, network equipment maker Cisco Systems is buying Acacia Communications for $2.8 billion.
As a global supplier of network equipment such as routers and switches, as well as services and other products related to networking, Cisco is in the business of network solutions. On the eve of large-scale 5G deployment, the Silicon Valley firm has been positioning itself to be the go-to source for customers, particularly telecom providers, which are feverishly investing in 5G technology.
They do not have a choice: Cisco’s Visual Networking Index projects that global internet traffic will more than triple, to 13.2 exabytes per day, in 2022, from 4.1 exabytes per day in 2017 – so the opportunity for 5G technology providers is immense.
Chuck Robbins, who has been Cisco’s CEO since 2015, has made acquisitions central to his efforts to bolster the company’s newer growth areas, including cloud, internet of things and cybersecurity. The Acacia acquisition is his biggest yet, and the company’s biggest since its $3.7 billion purchase of AppDynamics, a business performance monitoring software firm, in 2017.
Acacia will help Cisco bolster its 5G solutions in a crucial area. The company designs and manufactures high-speed, high-capacity optical components, which mobile networks worldwide will need in order to handle the surge of 5G network data. Acacia already supplies telecom providers and data centre operators around the world. Cisco itself is one of its biggest customers.
Analyst Mark Cash explained that in addition to bolstering Cisco’s technology for service providers upgrading to 5G, acquiring Acacia will put its optical portfolio ahead of the shift toward plug-and-play devices across communication segments. “Cisco’s optical portfolio was mainly for short-range data centre connections, and now gains Acacia’s skill set in areas such as metro, long-haul, and undersea,” Cash said.
As Reuters reports, revenue in Cisco’s infrastructure platform business rose 5% to $7.5 billion in its third quarter. This business is expected to get a boost from 5G network deployment, but Cisco executives are fairly conservative in their estimates for the near term, saying they do not expect to see an impact until 2020.