Cisco to acquire CMOS silicon photonics firm Lightwire

Cisco (NASDAQ: CSCO) says it plans to buy privately held CMOS silicon photonics developer Lightwire, Inc. Cisco expects to pay approximately $271 million in cash and retention-based incentives to close the deal. While subject to standard closing conditions, the acquisition should be completed in the third quarter of Cisco's fiscal year 2012, which ends this April.

Lightwire was founded in 2002 by Kal Shastri, a former AT&T Bell Labs engineer who settled in as chief technology officer. Investors included New Science Ventures, Artiman Ventures, Novitas Capital, and individual investors.

Like competitors such as Luxtera and Kotura, Lightwire has sought to develop multifunctional optical subsystems using CMOS processes. The company announced a 10GBase-LRM module in an SFP+ form factor just before OFC in 2008 (see “Lightwire intros first CMOS photonics 10GbE SFP+ LRM module”). It also claimed to have an active optical cable offering.

In this video from 2008, Shastri and then-CEO Vijay Albuquerque explain what they were up to. (Albuquerque was replaced in October 2009 by current President and CEO Ameesh Divatia.)

However, unlike Luxtera and Kotura, Lightwire had trouble getting products into the market. That hurdle is expected to be overcome by the second half of next year, according to a blog posted by Eve Griliches of AGC Research. Griliches reports that the product will focus on high-end data center requirements for data rates of 40 and 100 Gbps (and higher) and reaches as great as 40 km. The reduction in cost, density, and power requirements that a CMOS-based transceiver would provide would likely be compelling. Which explains why the company would interest Cisco. "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, senior vice president, 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." Market analysts approve of the deal. “The transaction hits several key themes we have highlighted before: system houses vertically integrating to own differentiating chip technology, power consumption as hot button, silicon photonics and photonic integration entering the mainstream, and innovators finding fertile ground at the intersection of photonics and electronics,” writes Karen Liu, principal analyst, components, at market research and analysis firm Ovum, in a research note. Liu sees the acquisition as part of a strategy to acquire technology that Cisco can leverage to create differentiation from competitors such as Huawei. The Lightwire technology potential could enable Cisco to create competitive advantage in power consumption and price. Griliches also likes the planned acquisition. “While targets are initially for routers and switches, all next-generation platforms will use this device and can begin integration designs today,” she wrote on the blog. “The CMOS platform is one of the most manufactureable in the world and is a key target for optical and electrical integration for many future platforms. Because of its friendly base, the CMOS is perfect for higher level integration at lower cost points.” Headquartered in Allentown, PA, with offices in Santa Clara, CA, Lightwire and its approximately 60 employees will become part of Cisco's Transceiver Modules Group Business Unit and Supply Chain Operations Group if and when the deal closes.