Cisco Systems Inc. today announced plans to buy networking chipmaker Acacia Communications Inc. in a deal worth about $2.6 billion.

Cisco will pay $70 per Acacia share, a sizable 46% premium to the Monday closing price. The company expects to complete the acquisition in the next six months pending regulatory approvals. 

Maynard, Massachusetts-based Acacia is a major supplier of the specialized chips used in optical networks to manage data traffic. Its product portfolio is divided into two main categories. The firm sells digital signal processors, which perform the computational heavy lifting involved in transferring data over large distances, as well as silicon photonics chips. These are compact circuits that convert packets from electricity to light and vice versa so they can be sent via optical cables.

Acacia’s silicon can be found in a wide range of environments. Its products help power the network equipment inside data centers, carrier infrastructure and the submarine communications cables that form the backbone of the internet.

Cisco is one of the network equipment suppliers that use Acacia chips in their hardware. The company has been a customer for about five years now. By acquiring the semiconductor maker, Cisco will take control of a key part of its supply chain and open up a new source of growth in the process. 

Acacia reported sales of $72.9 million for the three months ended March 31, a 44% jump over the same period a year ago that beat the average analyst forecast. The company projects that revenue will increase to between $104 million and $112 million in the second quarter.

Besides Acacia’s lucrative product portfolio, Cisco will gain valuable talent. Nearly 80% of the 386 employees Acacia had as of the end of 2018 were engineers or came from technical backgrounds.

Acacia is the second semiconductor firm that Cisco has acquired in the past year. Previously, the company inked a $660 million deal to buy Luxtera Inc., a Carlsbad, California-based maker of silicon photonics chips. Cisco has also been making strategic bets in other areas: Last month, it acquired a French startup called Sentryo SAS that made cybersecurity software for industrial control systems. 

Photo: Cisco