Cisco buying Hammerhead, Navarro in deals valued at $258M

Cisco Systems Inc. pulled the trigger on two acquisition targets today, buying network software start-up Hammerhead Networks Inc. for stock worth up to $173 million and circuit design firm Navarro Networks Inc. for stock worth up to $85 million, the company announced.

Cisco may also soon acquire two other undisclosed companies in which it has invested.

Hammerhead Networks, in Billerica, Mass., makes software to speed up billing, security and quality-of-service features for IP networks without degrading network performance. Cisco said it plans to integrate Hammerhead technology into its IP aggregation portfolio, consisting of cable, broadband and leased-line hardware and software.

Navarro Networks, in Plano, Texas, develops application-specific integrated circuit (ASIC) components for the Ethernet market. Cisco intends to improve its internal development of high-end ASICs with Navarro's technology while improving Cisco's technology choices for designing next-generation Ethernet switching platforms, Cisco said.

Both Hammerhead and Navarro are privately held, and the specific number of Cisco shares used for the purchase wasn't disclosed. The acquisitions are subject to various closing conditions and approvals, but the boards of directors of each company have approved the deals, Cisco said.

Cisco expects the purchases to close in its fourth quarter, which runs through July.

The company hinted at the two acquisitions in its quarterly filing with the U.S. Securities and Exchange Commission (SEC) in April. Cisco held options to buy Hammerhead and Navarro, and the two start-ups had options to force a sale to Cisco. Two other privately held companies remain acquisition possibilities, according to the filing. Cisco owns part of two more undisclosed start-ups and has options to acquire the remaining interest in those companies with its common stock. The companies also have options to force Cisco to purchase them, provided the start-ups meet certain technology milestones and other requirements.

Cisco didn't say whether Hammerhead and Navarro exercised their options to force a purchase or if Cisco moved first to buy the companies. Cisco estimated that it would cost $500 million in stock to purchase three of the four companies, and based on Cisco's SEC filing, it appears that two of those three are Hammerhead and Navarro. Cisco expects to acquire the remaining interest in the third company within the next six months, according to the filing.

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