Cisco to Acquire Storage Switch Company

Cisco, which already holds a stake in Andiamo, will exchange Cisco stock for shares of Andiamo it does not own. The final price, which Cisco said could be as high as $2.5 billion, will be based on Andiamo's sales in the three months prior to closing as well as Cisco's share price and sales.

Cisco is already the leading maker of equipment that directs traffic over the Internet and other networks. CEO John Chambers has previously hinted that storage could be the next major opportunity.

"This acquisition supports Cisco's strategy to enter into new growth markets, such as storage networking, where we believe we have the potential to be the number one or two player," Chambers said Tuesday.

Cisco will be able to offer customers storage products that work with networks built with its data-traffic equipment, a market it dominates.

"Andiamo's technology blends the benefits of data networking and storage networking," Chambers said.

The high-end storage area network market is expected to grow from about $1.2 billion in 2002 to $4.3 billion in 2006, according to the research firm Gartner Group.

Cisco also announced Tuesday that it would introduce a new line of storage switches developed by Andiamo. They are expected to be available by the end of this year.

The deal, which has been approved by both companies, is expected to close in Cisco's fiscal 2004 third quarter, which runs from February to April.

San Jose, Calif.-based Andiamo, which is Italian for "let's go," was founded in January 2001 and currently has about 270 employees. They will join the Cisco Storage Technology Group when the deal closes.

Shares of Cisco fell 6 cents to $14.69 in early trading Tuesday on the Nasdaq.

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