Cisco bags $500m Linksys

Networking giant Cisco Systems is to buy Linksys, a manufacturer of networking gear for consumers, in a stock deal valued at $500 million.

The deal will facilitate Cisco's entry into the consumer networking market, the company said in a statement. Following the close of the acquisition, Cisco will operate Linksys as a division and will continue to sell its products under the Linksys brand name.

"This acquisition supports our vision to drive innovations into the consumer market and create next-generation home networking solutions," Charles Giancarlo, senior vice president and general manager for product development at Cisco, said in a statement.

Linksys manufactures about 70 wired and wireless products for homes and small offices, selling them mainly at retail. The company has about 300 employees.

Cisco will issue common stock worth about $500m to acquire Linksys, and it expects to close the deal in the fourth quarter of its fiscal year, which ends in July. Cisco also expects charges for the acquisition to subtract no more than one cent per share from its fiscal 2004 profit. After charges, the company said it will add about one cent to 2004 earnings per share.

The acquisition has been approved by the board of directors of each company, but will be subject to closing conditions, including a waiting period.

The deal may also add another wrinkle to Cisco's relationship with Dell Computer. The PC maker sells a wide range of Linksys networking gear, alongside its own line of Dell TrueMobile wireless networking cards and base stations.

Cisco dropped a partnership with Dell, which sold Cisco networking equipment, and later called Dell a competitor. Cisco made that move about a year after Dell entered the network switch market with its own line of PowerConnect switches.