Cisco to Pay $660M for Luxtera, Maker of Advanced Data Center Chips

Cisco has agreed to pay $660 million for Luxtera, a Caltech spinout that makes optical chips for data centers.

The semiconductor company, founded in 2001, is based in Carlsbad, CA, a San Diego suburb. Cisco, the San Jose, CA-based tech giant (NASDAQ: CSCO), said Tuesday that Luxtera’s advanced chips will help it offer its customers faster and better network service performance.

Rob Salvagno, who heads Cisco’s mergers and acquisitions and venture investment team, said in prepared remarks that Luxtera’s “technology, design, and manufacturing innovation” improves data processing performance and scale while also lowering costs.

David Goeckeler, executive vice president and general manager of Cisco’s networking and security business, said in the statement that its customers are facing “an exponential demand” for Internet bandwidth. That’s because more people and businesses than ever are using cloud, mobile, and “Internet-of-things” applications.

“Optics is a fundamental technology to enable this future,” Goeckeler said. “Coupled with our silicon and optics innovation, Luxtera will allow our customers to build the biggest, fastest, and most efficient networks in the world.”

San Diego’s homegrown wireless giant Qualcomm (NASDAQ: QCOM), tends to get all the attention when it comes to semiconductor innovation. However, as the Luxtera acquisition illustrates, it’s not the only game in town. San Diego’s Cymer, which makes light sources used by chipmakers, sold to Dutch semiconductor equipment manufacturer ASML (NASDAQ: ASML) in 2012 for more than $2.5 billion. And the San Diego company formerly known as Peregrine Semiconductor, now called pSemi, was acquired by Japan’s electronic components maker Murata in 2014 for roughly $471 million. This year, pSemi shipped its 4 billionth chip.

Luxtera, which is tucked away in a town roughly 30 minutes north of downtown San Diego, has kept a low profile as it has built its business and exited in one of the region’s largest acquisitions of 2018. Along the way, the company raised about $130 million, according to venture financing tracker Crunchbase.

Luxtera’s investors include Japanese semiconductor equipment maker Tokyo Electron and venture funds August Capital, Lux Capital, New Enterprise Associates, and Sevin Rosen Funds.

“The company has shipped millions of silicon photonics transceiver products since inception and its tech quietly powers many of the largest data centers in the world,” Lux Capital co-founder and managing partner Peter Hébert wrote in a blog post about the deal.

The Luxtera team, which is headed by CEO Gary Young, will join Cisco’s optics business and report to Goeckeler, the company said.

The companies anticipate the deal will close in the third quarter of Cisco’s fiscal year 2019, which ends April 27.

Sarah de Crescenzo is an Xconomy editor based in San Diego. You can reach her at sdecrescenzo@xconomy.com. Follow @sarahdc

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