Pluggable Optics at Heart of Cisco, Acacia Dispute

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Pluggable optics is not a technology that’s talked about much, but in the networking world it’s definitely sexy right now. 

That’s because pluggable coherent optics modules are a key technology for cloud operators and service providers in Data Center Interconnect (DCI), Metro, and Long Haul networks. It allows them to increase the capacity of legacy and new fiber networks and helps them drive down the cost-per-gigabit of using these networks.

And that, perhaps, explains why Cisco was apoplectic about Acacia Communication’s announcement last December that it was calling off the $2.6 billion deal for Cisco to acquire Acacia.

The Root of the Dispute

Massachusetts-based Acacia makes and sells high-speed coherent optical interconnect products, and the deal announced last July was meant to ensure that Cisco had a strong optical offering as part of its portfolio. That was intended to appeal to carriers and service providers, and also to ensure that Cisco could grab a significant part of the 5G-related bonanza of equipment purchases that telecoms carriers will likely be making in the coming months and years. 

Acacia says that it is terminating the deal because Cisco failed to get the necessary regulatory approval from China’s State Administration for Market Regulation (SAMR) before the January 8th deadline that had been set.

But Cisco denies this, saying that it did get approval before that date. It then went to the Delaware Court of Chancery for confirmation that it had met all the conditions for the deal, and to oblige Acacia to go ahead with it. Acacia, shortly afterwards, filed a counterclaim seeing a declaration that it “validly terminated the merger agreement”.

Cisco claims, via its lawyers, that Acacia was really trying to wriggle out of the deal because it felt that it was now worth more than when the deal was initially struck, and that it could therefore extract a better deal out of Cisco, according to a Bloomberg report. 

But, and here’s what’s important, Cisco believes that “the termination or loss of a unique strategic merger like this one is a classic case of irreparable harm,” according to William Lafferty from Cisco’s legal team.

Also read: Understanding the Zero Trust Approach to Network Security

Pluggable Optics as Hot Commodity

Cisco believes that optics is a foundational technology for future switching and routing products, and it really, really wants to get its hands on Acacia’s silicon photonics platform. Bill Gartner, Cisco’s optical systems and optics group senior vice president, sees the emergence of pluggable optics serving the DCI, Metro and Long Haul segments as hugely important for Cisco’s customers, and Acacia provides a way for Cisco to get its hands on them. 

Who’s in the wrong here – Cisco or Acacia? What is clear is how much Cisco values Acacia’s pluggable coherent optic technology, and how much Acacia believes Cisco is right to. With 5G about to kick off in a big way, remote working likely to remain at a high level, and the growth in cloud-based technologies like SASE, it’s unlikely that either company is wrong.

Editor’s Update: In mid-January 2021, Cisco agreed to acquire Acacia for a reported $4.5 billion, effectively ending their court battle. The acquisition will boost Cisco’s switching, routing, and optical networking offerings, the latter of which will likely expand Cisco’s reach in the pluggable optics solutions’ space. 

Read next: Understanding the Role of Enterprise Data Fabrics

Paul Rubens
Paul Rubens
Paul Rubens is a technology journalist specializing in enterprise networking, security, storage, and virtualization. He has worked for international publications including The Financial Times, BBC, and The Economist, and is now based near Oxford, U.K. When not writing about technology Paul can usually be found playing or restoring pinball machines.

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