Hoping to shore up its position in the VDSL chip market, Ikanos Communications announced that it will acquire the network processor product line of Analog Devices, Inc. for $30 million in cash.

The deal, which is expected to close in the first quarter, gives Ikanos ADI’s Fusive gateway processor. Additionally, it includes ADI’s Layer 1 products in the ADSL and ADSL2+ world. Previously Ikanos had been limited to supplying its VDSL PHY Layer products.

“This acquisition is intended to move Ikanos from the physical layer or layer one to including layer 2, 3, 4 all the way through layer 7,” Rajesh Vashist, chairman and CEO of Ikanos said in a conference call with analysts.

Just as important, the acquisition gives Ikanos a greater reach in terms of geography and customers. Until recently, the vast majority of the company’s revenue has come from vendors supplying Asian carriers with VDSL equipment. The ADI acquisition puts it in position to be a primary supplier of ADSL 2+ chip sets and VDSL2 gear for European carriers. Additionally, it picks a strategically significant relationship with Netopia (), which has been in providing CPE to BellSouth for a couple of years.

In the conference call, Vashist also said the company sees some opportunity with BellSouth because of its preference for using bonded DSL technology.

Like virtually every move in the access and CPE market today, though, the Ikanos acquisition was made with video services in mind. ADI Fusiv processor is capable of handling the full capacity of VDSL2 (100 Mb/s on both the upstream and downstream paths) meaning it could easy provide enough bandwidth for multiple high-definition streams. The product also comes with key software that allows carriers to control quality of service on those high-speed streams.

“To deliver a high quality experience to the user at high-definition rate, the video and voice gateway must incorporate quality of service,” Vashist said. “This is even more challenging at VDSL speed and all the gateways that were designed for ADSL or ADSL2+ are just not able to keep up with this because of the network processor.”