Cisco Systems, the leading maker of equipment that directs Internet traffic, made its first significant move into the home networking market Thursday as it announced an agreement to buy The Linksys Group for $500 million in stock.
Linksys, based in Irvine, Calif., has one of the most extensive lines of routers and other equipment used in home networks, which have grown increasingly popular as high-speed Internet connections and households with more than one computer become common.
"Fueled by consumer broadband adoption, the home networking space has experienced mass market acceptance,' John Chambers, Cisco's chief executive, said in a statement.
Though Chambers has been a vocal supporter of consumer broadband and has criticized delays in the rollout, Cisco has offered few products geared for the home. Cisco's routers and switches are commonly found in the back rooms of large corporations and government agencies.
Other firms, such as Linksys and Netgear, have focused on consumers and small businesses, introducing relatively inexpensive routers, switches, print servers and wireless equipment to share Internet and other computing resources among home or small office computers.
But that market shows signs of taking off, analysts said. Networking equipment sales to small and home offices are expected to grow from $3.7 billion in 2002 to $7.5 billion in 2006, according to data compiled by the Dell'Oro Group, Synergy.
Cisco said the acquisition, which has been approved by both companies' boards, will dilute its fiscal 2004 pro forma earnings per share by no more than a penny. It also is subject to approval by antitrust regulators.
Privately held Linksys will be operated as a division of Cisco. Founded in 1988, it has 308 employees.
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