Cisco has announced its intent to acquire privately held CoreOptics, a designer of digital signal processing (DSP) solutions for high-speed optical networking applications. Based in San Jose, CA, with the majority of its employee base in Nuremberg and Gerlingen, Germany, CoreOptics will enable Cisco to equip service provider customers with highly advanced 100 Gigabits per second (Gbps) transmission technology.

Under the terms of the agreement, Cisco will pay approximately $99 million in cash and retention-based incentives in exchange for all shares of CoreOptics. The acquisition is subject to customary closing conditions and is expected to close in the second half of calendar year 2010.

According to Cisco’s Visual Networking Index research, global IP traffic will increase fivefold from 2008 to 2013 with a 40 percent compound annual growth rate.

The next phase of innovation in optical networking will be driven by sophisticated modulation formats and advanced DSP technologies, according to Cisco. These new capabilities enable the efficient transmission of large amounts of data over existing fiber optic installations. By enabling high speeds across an existing infrastructure, Cisco and CoreOptics will address the challenge facing service providers of accommodating the growth in network traffic.

Upon completion of the acquisition, CoreOptics employees will become part of the Cisco Service Provider Technology Group and work with Cisco’s existing optical engineering teams in Monza, Italy; Bangalore, India; and Richardson, Texas.

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