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Cisco Systems has made a major expansion into the home networking market with the acquisition today of Linksys in a $500 million all stock deal.

Linksys makes a broad line of broadband access and wireless LAN products targeted at consumers and SOHO (small office/home office) users.

Cisco said the acquisition represents its entry into the consumer/SOHO networking market, which is expected to grow from $3.7 billion in 2002 to $7.5 billion in 2006 worldwide, according to research from Dell'Oro Group and Synergy.

Under the terms of the agreement, Cisco will issue common stock with an aggregate value of approximately $500 million to acquire the Linksys business and to assume all outstanding employee stock options. Privately-held Linksys has 308 employees.

The acquisition of Linksys (which has been approved by the board of directors of each company) is expected to close in the fourth quarter of Cisco's fiscal year 2003.

Upon closing of the acquisition, Linksys' business will operate as a division of Cisco but its products will continue to be sold under the Linksys brand through its existing retail, distributor and ecommerce channels. In addition, Linksys gains access to Cisco's sales force.

Linksys' product line for home networking, includes more than 70 products including wireless routers and access points for simultaneous sharing of broadband Internet connections, wireless network adapters and wireless print servers. It also includes traditional wired products such as Ethernet routers and cable modems, unmanaged switches and hubs, print servers and network attached storage for easy sharing of digital music, photo and video media files.

Cisco executives praised the easy-to-use features of the Linksys product line and talked of creating "next-generation home networking solutions".

We're not sure what this means. Cisco's statementon the acquisition doesn't say either.

Along with the usual marketing blurb Cisco's statement talks about typical home networking applications such as "sharing broadband Internet connection among several users", "interconnecting computers to share files such as photos, music" and "sharing resources" over either wired or wireless networks.

Which is nice. ®

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