Cisco is on another acquisition spree. In its latest play, the networking company announced plans to acquire privately held Lightwire. Cisco will pay about $271 million in cash and retention-based incentives for the company.

As its name suggests, Lightwire develops advanced optical interconnect technology for high-speed networking applications. That means the Lightwire acquisition is in line with Cisco's renewed focus on networking.

With Lightwire's tech in its toolbox, Cisco expects to deliver cost-effective, high-speed networks with the next generation of optical connectivity and pave the way for its service provider and data center customers to meet the growing demands of video, data, voice, mobility and cloud services.

Surya Panditi, senior vice president of Cisco's Service Provider Networking Group, promised the tech would help "transform Cisco's optical connectivity business to an integrated technology platform that supports our customers' burgeoning need for cost-effective high-speed networks." Time will tell if Panditi is right, but Cisco is clearly moving in the direction of market trends with its latest acquisition.

Silicon Photonics Technology

At the heart of Lightwire's innovation is a technology called silicon photonics, or CMOS. Cisco expects CMOS to play a significant role in the enablement of high-speed networks. As Cisco sees it, Lightwire has proven its expertise in CMOS photonics and packaging design, making innovations in optical interconnects by integrating multiple high-speed active and passive optical functions onto a small silicon chip.

The smaller size, lower power consumption and scalability of Lightwire's CMOS-based technology makes it possible for switches, routers and optical transport systems to have higher-density optical connectivity at a lower cost. This, Cisco said, allows carriers to slash operational and capital costs and offer new revenue-generating services.

"The Lightwire acquisition builds on Cisco's existing optical networking expertise and complements Cisco's 2010 acquisition of CoreOptics, a designer of coherent digital signal-processing solutions and application-specific integrated circuits for high-speed optical networking applications," said Ned Hooper, Cisco's chief strategy officer.

Building Optical Networking

Cisco picked up CoreOptics, which designed digital signal processing solutions for high-speed optical networking applications, to equip its service provider customers with 100 gigabits per second transmission technology. Cisco has shown fruit from that acquisition as it works to meet traffic growth that it predicts will increase fivefold from 2008 to 2013, with a 40 percent annual growth rate.

"No matter what Cisco says they are today, they are and always will be a networking vendor first. This acquisition demonstrates that," said Zeus Kerravala, principal analyst at ZK Research.

"When you combine this with the CoreOptics acquisition, you can see that Cisco is focused on the optical space and allowing for higher-speed networks. Once you get past 10 gigabits, you really can't use copper anymore. So all high-speed connectivity is going to be optically connected. This acquisition makes a lot of sense for Cisco."

Cisco was not immediately available for further comment on the news. But company statements indicate Lightwire employees will be integrated into Cisco's Transceiver Modules Group Business Unit and Supply Chain Operations Group.