Cisco is looking to bulk-up its optical systems portfolio with the acquisition of Acacia Communications for approximately $2.6 billion.

The deal is Cisco’s largest since it laid out $3.7B for AppDynamics in 2017.

Acacia develops, manufactures and sells high-speed coherent optical interconnect products that are designed to transform networks linking data centers, cloud and service providers. Cisco is familiar with Acacia as it has been a “significant” customer of the optical firm for about five years, Cisco said.

Acacia’s other customers include Nokia Oyj, Huawei and ZTE.

"With the explosion of bandwidth in the multi-cloud era, optical interconnect technologies are becoming increasingly strategic,” said David Goeckeler, executive vice president and general manager of Cisco's networking and security business in a statement. “The acquisition of Acacia will allow us to build on the strength of our switching, routing and optical networking portfolio to address our customers' most demanding requirements."

For Cisco, one of the key drivers for making this deal was Acacia’s coherent technology – “a fancy term that means the ability to send optical signals over long distances,” said Bill Gartner, senior vice president of Cisco’s Optical Systems and Optics business. “That technology today is typically delivered via a line card on a big chassis in a separate optical layer but with Acadia’s digital signal processing, ASIC and other technology we are looking to move that from a line card to a pluggable module that increases network capacity, but also reduces complexity and costs.”

In addition, Acacia uses silicon photonics as the platform for integration of multiple photonic functions for coherent optics.

In February Cisco closed a deal to buy optical-semiconductor firm Luxtera for $660 million, bringing it the advanced optical technology customers will need for speed and throughput for future data center and webscale networks.

The combination of Cisco’s and Luxtera’s capabilities in 100GbE/400GbE optics, silicon and process technology will help customers build future-proof networks optimized for performance, reliability and cost, Cisco stated.

The reason Cisco snatched-up Luxtera was its silicon photonics technology that moves data among computer chips optically, which is far quicker than today's electrical transfer, Cisco said. Photonics will be the underpinning of future switches and other networking devices.

The acquisition is expected to close during the second half of Cisco's FY2020, and upon close, Acacia employees will join Cisco's Optical Systems and Optics business within its networking and security business under Goeckeler.