Cisco Systems to Buy Pirelli Unit for $2.15 Billion

Cisco Systems Inc., the world’s biggest maker of Internet equipment, agreed to buy the optical systems unit of Italy’s Pirelli for $2.15 billion in stock, filling a gap in its line of fiber-optic products. The company also will invest $100 million in Pirelli’s optical components unit and undersea cable operations, giving Cisco a 10% stake in each business. Pirelli is Europe’s second-largest maker of telecommunications cable, behind Alcatel, as well as a tire maker.

With the purchase, Cisco gains a product that boosts capacity by packing more data on each strand of fiber, helping it challenge Lucent Technologies Inc. and Nortel Networks Corp. in a market that will more than quadruple to $41 billion worldwide by 2003, according to market researcher RHK Inc.

The unit Cisco is acquiring is estimated to have sales this year of about $225 million. That ranks it behind Nortel, Lucent and Ciena Corp. in the market for equipment for dense wavelength division multiplexing, according to Merrill Lynch.

Cisco rose $3.56 to a record close of $103.25 on Nasdaq.