Founded in 1984, CISCO did not acquire a company during the first seven years of its existence; but, on September 24, 1993, Cisco acquired “Crescendo Communications”, a LAN switching company.
The “buy” pillar of the company's three pillars of innovation: “build,” “buy,” and “partner”. Cisco focuses on acquisitions that capitalize on new technologies and business models.
Cisco's growth strategy is based on identifying and driving market transitions. Corporate Development focuses on acquisitions that help Cisco capture these market transitions.
Cisco segments acquisitions into three categories: market acceleration, market expansion, and new market entry.
Until 1st Nov 2014, Cisco has acquired close to about 170 companies.
Back in 1993, John Chambers was negotiating with Boeing on a $10 million router deal. Boeing made it clear to Chambers; there would be no purchase order unless Cisco cooperated with Mario Mazzola's Crescendo Communications. The result, Cisco acquired Crescendo for Cisco stock then worth $94.5 million. Wall Street was in disbelief that Cisco spent so much to acquire only $10 million in annual revenue; Cisco's stock took a dip for the first time. 3 years later, Mazzola's team was producing more than $500 million in annual revenue.
This was not one of the top acquisitions in terms of dollars, but this was the first step and one of the important strategic decision which gave way in the correct direction and became one of the firm pillars of Cisco’s three pillars of innovation (Build, Buy, and Partner).
This acquisition also was an entering point of “Mario Mazzola”, who still today along with his team (affectionately known as MPLS - Mario Mazzola, Prem Jain, Luca Cafiero and Sonia Jiandani) takes on a major role in Cisco’s acquisitions.
In April 1996 Cisco acquired StrataCom, a leading supplier of Asynchronous Transfer Mode (ATM) and Frame Relay high-speed wide area network (WAN) for $4 billion.
During August 1999, with the acquisition of Cerent Corp and Monterey Networks (for about $6.9 billion and $500 million respectively) Cisco entered the optical transport market with next-generation products in order to provide service provider customers a complete infrastructure solution for transitional and New World networks.
In May 2000, Cisco acquired Arrowpoint Communications for about $5.7 billion.
ArrowPoint was start-up company building equipment that speeds delivery of Web content over the Internet, held a public offering March 31 that gave the company a market value of about $1 billion based on its opening stock price.
Sometimes, we necessitate paying a great deal more to get what we hope, but in business this is not always considered as a loss.
In 2003, Cisco bought Linksys for $500 million. Linksys was market and product leader in the Consumer/SOHO networking market. Linksys’ products include wireless/wired home routers and access points, wireless adapters for laptops and desktops and unmanaged switches.
My First job in Infosys was supporting these Linksys Wireless Products, so Linksys is one acquisition that I cannot forget and this was also a profitable acquisition for Cisco.
Cisco bought Airespace in Jan 2005 to integrate advanced capabilities of Wireless Networking (WLAN) in Cisco’s Core networking and switching business for $450 million.
In Nov 2005 Cisco acquired Scientific Atlanta, a leading global provider of set-top boxes, end-to-end video distribution networks and video system integration for about $6.9 billion.
IronPort was acquired in 2007 for $830 million, which focused on Security (Securing email, messaging and other sorts of content).
Cisco acquired WebEx Communications Inc in March 2007 for approximately $3.2 billion to get stronger in on-demand collaboration applications. With similar intentions, Cisco went ahead acquiring Tandberg during April 2010 for $3.3 billion to expand its collaboration portfolio, and NDS Group Ltd in Mar 2012 in $5 billion to accelerate the delivery of Videoscape.
Cisco paid $750 million for Mazzola’s Andiamo Systems (Storage Area Network) in 2004, $678 million for Nuova Systems (Data Center) in 2009, and $863 million for Insieme Networks in 2013.
This blog may help you see why Cisco Has Showered Mazzola’s team with billions of Dollars.
Cisco acquired software defined networking spin-in “Insieme Networks” to compete with VMware NSX (Nicira Network) in the SDN space. The fight in SDN space (Software Defined Network) made a good business inside story as it increased the business rivalry between CISCO and VMware (EMC). The narrative continues as Cisco reduced its ownership stake in VCE from 35 percent to about 10 percent.
NetApp (storage rival of EMC) and Cisco already partner today around FlexPod, a converged infrastructure architecture that competes with VCE's Vblock.
By the end of October 2014, Cisco has already acquired 5 companies, one of them is Metacloud.
Metacloud’s OpenStack-based cloud platform will accelerate Cisco’s strategy to build the world's largest global Intercloud, a network of clouds, together with key partners to address customer requirements for a globally distributed, highly secure cloud platform capable of meeting the robust demands of the Internet of Everything.
Starting from 1993, Acquisition has been one of Cisco’s important growth strategies. Not all the Acquisitions may have been successful, but the right acquisitions have helped Cisco to capture market transitions.
Friends, Acquisitions are not really as easy as we read, think and discuss. Every Acquisition is a challenge. Not all companies get ready to sell themselves when they are doing well in market, so it is all about offering the right price at the right time (catching market transition).
Acquisition of “ArrowPoint” is a good example here. ArrowPoint president Louis Volpe said at the Networld+Interop conference. "We would have been comfortable staying independent, but with what they were offering, it became a no brainer". This reminds me of Don Corleone’s famous Dialogue from the movie GodFather - "I'm gonna make him an offer he can't refuse"
When Leadership Team plans an acquisition, they study the target company, check Company’s reputation within the business community, evaluate the business value and do a lot of research and then enter the deal-making process.
Here is the list of all the Cisco acquisitions made till date (sorted by Year)
The current focus areas today are “Internet of Everything”, “Software Defined Networks (SDN)” and “InterCloud Communication”. Keep an eye on my LinkedIn updates as you may get to read more about these trending technologies.
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