Cisco’s planned $2.6 billion Acacia Communications acquisition, announced yesterday, sounds like a massive amount of money to pay for a small optical systems firm. It’s also a strategic move that not only brings coherent optical interconnect in house but will likely increase the networking vendor’s clout with cloud and service provider customers.
Acacia, which is an existing Cisco supplier, makes high-speed coherent optical interconnect products for webscale companies, service providers, and data center operators. Cisco already uses its technology in some of its optical systems and routers. The Maynard, Massachusetts-based company and its employees will join Cisco’s optical systems and optics group within the networking and security business when the acquisition closes later this year.
“The market that Acacia plays in for coherent technology is a multi-billion market,” said Bill Gartner, senior vice president and general manager of Cisco’s Optical Systems and Optics Group, in an interview with SDxCentral. “We are a relatively small player in that market, but we think this expands the opportunity for optical systems.”
What Is Coherent?
Coherent technology, he explained, is what allows you to send optical signals over long distances, such as between two data centers in a city, or even across a country. “In that outside-the-data-center environment that coherent optical transmission becomes necessary,” Gartner said.
Cisco owns the inside-the-data-center optical networking piece, too. It brought this in house when it acquired Luxtera in December 2018.
“We can do very significant signal processing on the optical signal to help it travel very long distances — Acacia plays in that environment — and Luxtera plays in the data center, in that short-reach environment,” he said.
Acacia’s technology also addresses a key trend that Cisco sees in this segment, Gartner added. “That technology that has traditionally been delivered in chassis-based systems is going to find its way into pluggables,” he said. These pluggable optics increase network capacity while also reducing complexity and costs. “They get plugged directly into a router or switch, and we’d like to include that pluggable into that router or switch, which opens up [total addressable market] in the billions for us,” he said.
This technology will also play a foundational role in Cisco’s intent-based networking, Gartner said.
“We have a very substantial play in routing and data center switching,” he said. “Our intent-based networking portfolio relies on fundamental innovations for three foundational technologies: silicon, software, and optics. Those three come together and that allows us to build world-class routers and switches and intent-based networking products. So this is playing into the optics portion of that foundational technology.”
Key Optical Vendors
Cisco’s betting on pluggable optics being the future of routing and switching technologies — and that’s a smart bet, said Jimmy Yu, vice president and industry analyst for Optical Transport program at Dell’Oro Group.
“For the past few years, I always made a comment that I thought the optical systems market would return to the past when the key vendors were the ones that did their own components,” he said. “Those companies were Nortel, Lucent, Alcatel, and Marconi. All four sold their components business when the optical market crashed back in early 2000.”
“Once Cisco concludes this acquisition, four optical system vendors will have in-house capability for developing and producing the key components for coherent line cards,” Yu continued. “The four system vendors are Cisco, Ciena, Huawei, and Infinera.”