Cisco Systems Inc. (CSCO.O) agreed to buy Acacia Communications Inc. (ACIA.O) for about US$2.6 billion, the technology giant’s latest acquisition as it seeks technologies to meet customer demand for more robust networks.

The San Jose-based company will pay US$70 a share, a 46 per cent premium to Acacia’s closing price on Monday, the companies said in a statement Tuesday. The purchase price is about US$2.6 billion on a fully diluted basis net of cash and marketable securities, and the deal is expected to close in the second half of Cisco’s fiscal 2020 year.

Cisco, whose equipment makes up the backbone of the internet and corporate networks, has recently rekindled growth by revamping existing products and adding new software and services under a corporate makeover by Chief Executive Officer Chuck Robbins. In May, the company gave a bullish sales and profit forecast for the current period, a sign that corporations continue to spend on their computer networks despite concern that a trade dispute between China and the U.S. will slow global economic growth.

“Bringing Acacia’s high-speed digital signal processing (DSP) technologies in-house allows Cisco to better compete with peers, such as Ciena,” said Woo Jin Ho, senior technology analyst at Bloomberg Intelligence.

Acacia’s stock surged about 40 per cent in early trading, while Cisco shares fell about 1 per cent. Cisco’s stock had climbed 30 per cent this year through Monday’s close and has doubled in the past three years.

"By innovating across software, silicon and optics, Cisco is reinventing every domain of the network with our intent-based architectures," Cisco’s Executive Vice President and General Manager David Goeckeler said in the statement.

Acacia went public in May 2016 at US$23 a share and its stock surged that year to more than US$120. More recently, it has traded at less than half that peak.

Under Robbins, Cisco has made a series of acquisitions aimed at bringing in software and services that will ease the company’s dependence on hardware. He’s trying to build more predictable, recurring revenue by offering customers the ability to remotely manage and monitor their networks in order to make them more efficient and secure.

Robbins has said that transformation will take time as many of the new offerings require customers to shift to newer hardware that will support advanced functions and services.

Cisco’s status as the biggest maker of routers, switches and other gear for connecting computers means its earnings are seen as a broad indicator of corporate spending plans. The company gets only a tiny percentage of sales from China, where it’s been largely locked out of the market, and in one way may be a beneficiary of the ongoing trade dispute, which includes U.S. government attempts to block purchases of equipment from one of its biggest rivals, Huawei Technologies Co. Still, if business spending is hindered by an overall economic slowdown caused by trade uncertainty, Cisco’s sales could feel a hit, analysts have said.

--With assistance from Peter Elstrom.