Cisco has announced it will acquire the intellectual property, a majority of the engineering team and select assets from privately-held competitor Procket Networks, a maker of routers and routing technology, for $89 million in cash.

Procket specialises in routing silicon and software development and Cisco says the purchase will add a "rich intellectual property portfolio", and a team of "proven" silicon and software architects, to its own routing technology and products. The deal will not include Procket products, customer contracts, liabilities, debts or real estate.

"The addition of Procket's engineering team to Cisco offers a unique opportunity to accelerate development of silicon and software across Cisco's next generation routing portfolio," said Mike Volpi, general manager of the Routing Technology Group. "Procket has some of the world's foremost designers of sophisticated silicon, software, and network systems, with an average of over 15 years of experience in their respective industries. Adding this talent to Cisco's world-class engineering team will help drive continued innovation in network infrastructure."

The deal is a curious one, however. Procket was an emerging competitor to Cisco in core routing with the introduction of its PRO/8800 router last year and had taken about two percent of the 10Gbit/s routing market in the first quarter of this year.

Cisco recently announced its next-generation core router, the CRS-1 and heralded its arrival as the beginning of a new era of homegrown routing innovation. The CRS-1 took four years and $500 million for Cisco to develop. It features 40Gbit/s silicon packet processors (SPPs) co-developed with IBM, as well as the modular IOS-XR operating system with a kernel acquired from QNX Software Systems.

Cisco and IBM claimed the SPPs are "the world's most sophisticated 40Gbit/s application specific integrated circuit." Yet Procket's silicon technology now casts the future of the SPP into doubt. Procket also has a modular operating system for its routers which would also appear the limit the lifespan of IOS-XR.

"Cisco's need to go outside shows there are fundamental issues with the CRS-1," says Hudson Gilmer, senior marketing manager at Avici. "There's something broken within Cisco's own development facilities. They now have three platforms [IOS, IOS-XR and Procket's PRO/1] and that's got to be confusing to customers."

"Procket ran out of money," says Mukesh Chatter, president, CEO and founder of Axiowave, a four-year-old core router maker. "Procket was a good box for best-effort applications, which was 1998 and 1999's problems. It did not enable carriers to make money. It was Juniper on steroids."

Cisco will own Procket's entire intellectual property portfolio, and the engineers, including Procket founder and CTO Bill Lynch - lead architect for Sun's UltraSPARC-IV microprocessor - will become part of Cisco's Routing Technology Group. In all, 17 former Cisco engineers that were employed by Procket will be rejoining Cisco. Procket CEO Roland Acra, who had been a Cisco service provider CTO, will be under contract to Cisco until Procket's assets are assimilated into the company. He will then move on to other endeavours.

This deal is subject to regulatory approval and is expected to close in the first quarter of Cisco's fiscal year 2005.