Cisco Pays $100 Million for No-income Startup Actona

Cisco Systems is to pay $82 million in cash and $18 million to acquire a small Israeli start-up company, Actona Technologies, which specializes in wide-area file services software.

Cisco Systems is to pay $82 million in cash and $18 million to acquire a small Israeli start-up company, Actona Technologies, which specializes in wide-area file services software that facilitates data mangement across geographically distributed offices.

This is Cisco's seventh acquisition in Israel in recent years and the highest price it has paid for a company that has had no income in the past year.

Actona just three months ago succeeded in raising $10 million from private sources according to a company value of $30 million (after the money) - a third of the current purchase price.

A spokesman for Cisco in Israel yesterday denied the acquisition had cost them $100 million and said it amounted to $82 million. Sources close to the deal said, however, that Cisco was afraid of setting a precedent and had not reported the $18 million paid to the 45 employees as options and shares.

Ilan Kessler, Yisrael Cidon and Yisrael Ben-Shaul, who founded Actona, will get $10 million collectively from Cisco in cash.

So far the company has raised $23 million. The American VC fund, Mayfield, which invested in Actona in March, will make a $12 million capital gain on its $5 million investment.

The other investors - the Israeli venture capital funds, Fantine and Evergreen, will also get back about four times their original investment. Evergreen which invested $5 million will make gains of some $17 million and Fantine, with a $1.9 million investment, will reap about $5 million profit.

Financial observers believe the main catalyst for the acquistion was the major Actona shareholder, the Israeli branch of the American VC fund Sequoia. Since the late 1990s, when Sequoia first started investing in Israel, it has made three exits - all of them through sales to Cisco. The last was the sale of the Israeli security tech company Riverhead in March. Sequoia invested $9 million in Actona and will make gains of some $25 million.

Haim Sadger, chairman of Actona, yesterday said the company had been in contact with another potential buyer. "We got offers after we finished raising the capital in March because this was confirmation the company was good," he said.

Actona was set up in 1999 and several times faced closure. It has branches in Haifa and Los Gatos, California, and has 50 employees.