Cisco Systems Inc, the world's largest networking-equipment maker, on Saturday said that it has agreed to buy Lightwire Inc for $271 million to add optical connectivity technology used in high-speed networks. 

Cisco will pay the sum in cash and retention-based incentives and the purchase of the Allentown, Pennsylvania-based company will probably be completed in the fiscal third quarter, Cisco said in a statement.

Silicon (CMOS) photonics technology is expected to play a significant role in the enablement of high-speed networks. With expertise in CMOS photonics and packaging design, Lightwire has made 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 enable switches, routers and optical transport systems to have higher-density optical connectivity at a lower cost, allowing carriers to further reduce their operational and capital costs and offer new revenue-generating services.

“The acquisition of Lightwire will support our data center and service provider customers as they manage the continuing deluge of network traffic alongside tight capital and operating budgets,” said Surya Panditi, SVP, Cisco Service Provider Networking Group. “With the combined know-how from Cisco in silicon design and Lightwire in CMOS photonics, we will transform Cisco’s optical connectivity business to an integrated technology platform that supports our customers’ burgeoning need for cost-effective high-speed networks.”

“Acquiring Lightwire’s advanced technology exemplifies Cisco’s build, buy, and partner innovation model and supports our focus on driving market leadership in core networking, one of Cisco’s five strategic priorities,” said Ned Hooper, Cisco’s chief strategy officer. “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.” 

Closely held Lightwire's technology would help Cisco's customers to meet growing demand for video, data and so-called cloud services. Chief Executive Officer John Chambers has eliminated jobs and exited businesses in a bid to reverse the slide that knocked 11 per cent off San Jose, California-based Cisco's share price last year. 

Cisco rose 0.2 per cent to $20.28 in early trading at 8:39 a.m. New York time.