San Francisco: Fabless chip vendor Broadcom plans to acquire Dune Networks, a developer of solutions for datacenter networking equipment, in a deal worth $178 million.

Under the terms of a definitive agreement signed by the two companies, Broadcom expects to pay approximately $178 million, net of cash assumed from Dune, to acquire all of the outstanding shares of capital stock and other rights of the firm. The purchase price will be paid in cash, except that a portion of such purchase price attributable to unvested employee stock options will be paid in Broadcom restricted stock units.

The boards of directors of both companies have approved the acquisition, which is expected to close prior to March 31, 2010, Broadcom said. Dune, a nine-year-old startup that began in Israel, develops switch fabric solutions for datacenter networking equipment. The company says that it has developed a scalable chipset that supports bandwidth speeds of up to 100Gbps per port and can connect more than ten thousand servers (ports) in a single deployment.

"Dune's massively scalable interconnect fabric, combined with our Ethernet products, augments our portfolio of solutions for datacenter networking equipment," said Martin Lund, Vice President and General Manager of Broadcom's Network Switching line of business.

"This technology is particularly well suited to meet the emerging requirements for cloud computing networks at a large scale, and will enable us to address new market applications for Ethernet in the datacenter," Lund added.