Cisco Is Said to Be in Talks to Buy Optical Chip Maker Luxtera

Ed Hammond and Ian King (Bloomberg) -- Cisco Systems Inc., the biggest maker of networking equipment, is in talks to purchase optical chip technology company Luxtera Inc., according to people familiar with the plans.

A final price for the closely held company hasn’t been determined but a deal will likely value Luxtera in the hundreds of millions of dollars, said the people, who asked not to be identified because the negotiations are private. Cisco beat out rival bids from other companies including Intel Corp. and Broadcom Inc., one of the people said.

The transaction hasn’t been completed and an agreement might not be reached, the people said.

Representatives for Luxtera, based in Carlsbad, California, and Cisco declined to comment. Intel and Broadcom didn’t have an immediate comment.

Luxtera develops silicon photonics technology, a way of converting information encoded into photons and carried over fiber optic cables directly into semiconductors, that greatly speeds the transfer of data. Other equipment is usually needed to turn light from fiber optic cables into the electronic signals needed to run computers. Luxtera says it can make a high volume of chips that can do that job, something that’s eluded other companies in the industry for years.

Adding that technology would give Cisco more capabilities in the components it uses to build networking machinery. The company has struggled to rekindle growth amid an industrywide migration to cheaper machinery that uses open-source software. 

By betting on silicon photonics, Cisco may be looking for more fundamental technology that could differentiate its products. Under Chief Executive Officer Chuck Robbins, Cisco has also expanded into software and networking services to lessen its dependence on proprietary hardware and software combinations.

Luxtera’s products are used in data centers to transfer information between server computers, as well as in mobile phone network base stations. Chief Executive Officer Greg Young was previously at Intel and Broadcom.