Cisco Systems Acquires Assets from Procket Networks

Cisco Systems is to acquire the assets of Procket Networks in a cash deal valued at US$89 million. Procket Networks was a start-up that raised US$272 million in venture capital thanks to its development of routers it claimed could offer 30 percent to 65 percent savings over more traditional ones.

Cisco Systems said that it was not purchasing the entire company, just “select assets” that will include Procket’s intellectual property and the company’s engineering team. Cisco Systems was attracted to Procket Networks because of its experience in silicon design and the development of modular software.

In fact, Cisco was an early investor in Procket when the startup recast itself from a chipmaker to a systems vendor in the spring of 1999. That investment became “negligible” as Procket continued to collect funding, eventually amassing nearly $300 million — most of which was earmarked for research and development — and emerging from stealth mode in 2003.

Market Dominated by Cisco

But revenue was hard to come by in a global market overwhelmingly dominated by Cisco and, to a lesser extent, Juniper Networks. In the second half of 2003, the first two quarters in which Procket shipped its gear to customers, it took in less than $10 million in revenue.

Although revenue for the first quarter of 2004 — the last quarter for which Procket has complete records — was ramping up from 2003 levels as Procket garnered about a dozen paying customers, Procket became low on cash by that point, spending much of its time trying to raise additional funds or find well-established strategic partners.

Neither came, the company said, because of a lack of immediate demand from large carrier customers.

Cisco will retain about 120 of Procket’s 180-person workforce, said Procket CEO Roland Acra, a onetime Cisco veteran who has agreed to help Cisco absorb the assets after the deal closes sometime this summer, but will not become a Cisco employee along with the bulk of his team.

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