Cisco Completes Purchase of Stake in Switch Developer

Cisco Systems Inc., the world’s largest maker of equipment to link computers, said it completed the purchase of the 56% of network-switch developer Andiamo Systems Inc. it didn’t own for $750 million in stock.

Cisco will record stock-compensation costs of $58 million as an operating expense this quarter because of the transaction and will amortize $95 million in deferred-stock compensation over four periods starting next quarter, spokeswoman Elizabeth McNichols said.

Cisco had $567 million in Andiamo compensation costs in the fiscal second quarter ended Jan. 24.

The company is acquiring Andiamo to add switches that speed information transfers between data-storage gear in networks. Cisco had previously invested $84 million in Andiamo debt convertible to a 44% equity stake, McNichols said. Andiamo, a start-up founded in 2001, is based at Cisco’s San Jose headquarters.

Shares of Cisco fell 49 cents to $23.19 on Nasdaq. The shares have risen 63% during the last year.

Cisco invested the $84 million from April 2001 to August 2002, said Craig Griffin, Cisco’s director of business development. The debt wasn’t converted to equity and instead “reduced the purchase price so that we won’t pay ourselves,” Griffin said.