Cisco Systems plans to acquire wireless vendor Linksys Group in a stock deal valued at $500m (£319m).
Linksys and Cisco both make products for the growing wireless Lan (WLan) market, but Linksys is particularly strong among home users of WLan access points and routers. Cisco sells similar products to corporations.
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The deal was struck so Cisco could enter the home and small business market for WLan products.
The companies have reached an agreement under which Cisco will issue about $500m in common stock to purchase Linksys and cover its employee stock options.
The deal is expected to close in the fourth quarter of Cisco's 2003 financial year, pending regulatory approval, that ends in July.
Cisco has made numerous acquisitions in the 1990s as the company's stock price soared, but had scaled back those efforts over the last two years.
The company has bought Signalworks, a maker of IP (internet protocol) telephony software and purchased security software company Okena in January.