Cisco Case Analysis

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3. return on investment: the key to achieve this is leverage Cisco’s access to customer to sell the acquired company’s product. Within 3 years they wanted to generate in revenues the money they paid for the company.

1993 – 1 acquisition

1994 – 3 acq

1995-1996 – 10 acq

Stratacom acquisitions showed some issues: longer than expected time to integrate, product overlap which resulted in Cisco discontinuing one of its products, different compensation schemes.

1997-1998 – 14 acq

1999 – 18 acq

Cisco’s Strategy in the New Millennium

Acquired Pirelli Optical Systems: no geographical nor cultural proximity

PROBLEM: the dramatic pace of acquisitions from 1998 to 2000 overloaded Cisco’s ability to undertake adequate due diligence. Moreover, the companies acquired before were in emerging market so they faced no direct competition; afterwards, Cisco started entering markets with established competitors. Finally, during the dotcom bubble cisco had to acquire companies that hadn’t shipped a product yet, adding a lot of uncertainty.

2000: BURST OF INTERNET BUBBLE

cisco layed-off 8500 employees and revenues declined 30%

look at old vs. new cisco PAG. 14

August 2001: back to centralization to avoid product and resource redundancies (risk of being less customer-focused)

Spent $ 11 billion in platform deals

2003: Acquisition of Linksys Group – totally different strategy:

hands-off approach keeping the company’s name

geographical distance

big company

These platform deals were hard and slow to integrate

THE IRONPORT ACQUISITION

- founded in 2000

- system to fight email-borne spam

- two technological foundations: AsyncOS and SenderBase

A deal between the two companies would combine IronPort’s industry-leading content security applications and its SenderBase (the world’s first and largest email and web traffic monitoring service) with Cisco’s broad array of network infrastructure and security products

IronPort had 500 channel partners worldwide, high product margins (20%-22%)

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