A Fine Web of Business Relationships

Cisco

Systems, Inc. is the global leader in networking for the Internet. The company is today

the world’s biggest Internet commerce site, selling more than $20 million products

every day. Its products include routers, LAN and ATM switches, dial-up access servers, and

network management software. The products, integrated by the Cisco IOS software, link

geographically dispersed LANs, WANs and IBM networks. Cisco provides end-to-end networking

solutions that customers use to build a unified information infrastructure of their own,

or to connect to someone else’s network. Cisco IOS software provides network services

and enables networked applications besides offering technical support and professional

services to maintain and optimize network operations. The company with its headquarters in

San Jose, California, sells its products in approximately 115 countries through a direct

sales force, distributors, value-added resellers and systems integrators. It has major

offices in The US apart from more than 210 sale face="Times New Roman">s and support offices in 54 countries.

It is Cisco’s policy not to take a

rigid approach that favours one technology over the alternatives. The company believes in

listening to customers’ requests, monitoring all alternatives technological, and

providing customers with a range of options to make a choice. Strategically planned

acquisitions and mergers have enabled Cisco to offer such technology alternatives and also

to develop products and solutions around widely accepted industry standards. The company

has grown into a global market leader and holds number one or number two position in

virtually every market segment it participates in. Since becoming a public company in

1990, Cisco’s annual revenues have increased from $69 million in that year to $8.46

billion in 1998. And, as measured by market capitalization, The company is the third

largest company listed on NASDAQ and among the top 40 in the world. Let’s start on a

backward journey to take a look at each of its successful acquisitions one-by-one upto the

end of 1997.

A for acquisitions and A for April. Yes,

April ’99 was indeed a month of acquisitions for Cisco. During that month, Cisco

acquired Amteva Technologies, GeoTel Communications, Sentient Networks and Fibex Systems.

Amteva provides IP-based unified communications middleware that consolidates voicemail,

e-mail, and fax on a single IP network; accessible independent of location, time or

device. Unified communications, as a set of key value-added applications, showcases the

advantages of a converged data/voice/video network infrastructure and is important all

across the customer base–service providers, enterprise, and small and medium

business.

The GeoTel software solutions integrates

enterprise data applications with voice infrastructure devices such as PBXs to deliver

integrated data and voice to call centres over an Internet infrastructure and the PSTN.

This acquisition enhances the strategy to create an open data and voice software

infrastructure. GeoTel allows Cisco to accelerate the development of applications on the

Cisco packet voice architecture by providing a call centre infrastructure on which

companies like Oracle, SAP, Siebel, Vantive, etc., can build enterprise and service

provider applications.

Sentient Networks has developed the

industry’s highest density ATM Circuit Emulation Services (CES) gateway, which is

capable of transporting circuit-based private line services across packet-based ATM

networks. By delivering technology that allows service providers to combine their

circuit-based equipment with Internet-based data, voice and video gear, this acquisition

will help service providers migrate to cell and packet-based networks. Fibex Systems is a

pioneer in Integrated Access Digital Loop Carrier (IADLC) products–devices that

combine traditional voice services with data services using ATM as the underlying

architecture. The acquisition helps service providers’ transition from voice/data

traffic to cell/packet networks while maintaining traditional phone business using

existing circuit infrastructure.

In December 1998 Cisco acquired

PipeLinks–a pioneer in (Synchronous Optical Network/Synchronous Digital Hierarchy)

SONET/SDH routers capable of simultaneously transporting circuit-based traffic and routing

IP traffic. This acquisition was to enable Cisco’s service provider customers to

transition to the New World while utilizing their existing SONET/SDH infrastructure.

October 1998 saw Selsius Systems coming into the Cisco fold. Selsius is a leading supplier

of network PBX systems for high-quality telephony over IP network. Selsius’

technology enables Cisco to accelerate the transition from conventional, proprietary

circuit-switched PBXs to multi-service, open LAN systems capable of enabling the next step

in data/voice integration. On 15 September 1998 Cisco Systems, Inc. announced a definitive

agreement to acquire privately-held Clarity Wireless of Belmont, California. Clarity is a

leading developer of wireless communication technology for computer networking and

Internet service markets. This acquisition provides Cisco with fixed wireless technology,

which complements Cisco’s current last mile solutions including dial, xDSL, and

cable. Last mile technologies can be divided into two areas– narrow-band (dial) and

broadband (xDSL, cable and wireless)–which enables the integration of voice, data,

and video. Clarity’s technology is the first to provide high-speed, reliable

operation in obstructed environments, which have traditionally been challenging to

wireless network communications. In August 1999 Cisco acquired American Internet Corp.

(AIC)–a leading provider of software solutions for IP address management and Internet

access. Building upon an existing OEM agreement with Cisco, the acquisition enables Cisco

to extend AIC’s technology into other areas including the service provider line of

business. July 1998 saw SummaFour–a leading provider of programmable switches walk

into the Cisco fold. SummaFour’s open standards-based programmable switches enable

Cisco to offer value-added telephony applications to new and existing service provides as

well as extending these services to a voice-over-IP infrastructure. In May that year, the

take-over of Class Data Systems enabled Cisco to give network managers the ability to

allocate network resources according to company policies and priorities. Such control

capabilities mean business-critical applications are assured timely, as well as

high-quality network transport.In March 1998 Cisco signed a definitive

agreement to acquire privately-held Precept Software of Palo Alto, California. Precept is

a leading multimedia networking software company. The acquisition complements Cisco’s

strategy of developing networking solutions that integrate voice, data, and video traffic.

Precept’s IP/TV product is a client/server application that sends live or

pre-recorded digital video and audio to a large number of users over any IP-based local or

wide area network.

NetSpeed’s product suite added

customer premise equipment, central office products and broadband remote access to

Cisco’s DSL product portfolio in the same month that year. Its DSL products are

deployed in production carrier networks including Cincinnati Bell, Telus, and US West.

NetSpeed’s DSL product line for North America complements Cisco’s 1997

acquisition of DSL solutions from the Dagaz business of Integrated Network Corp. targeted

at international markets. February 1998 saw WheelGroup’s software technology extend

Cisco’s leadership in end-to-end network security solutions and help create a more

secure environment for Cisco customers to do business on the Internet. WheelGroup is a

leader in intrusion detection and security scanning software products. Its technology

delivers a ‘radar-like’ intrusion detection system that operates with network

routers and switches as real-time "sensors" to identify and respond to

unauthorized intrusion and hackers. WheelGroup’s scanning technology identifies

network security gaps throughout the enterprise and offers solutions for closing them.

This new class of detection and scanning technology will be referred to as "active

audit" by Cisco.

Way back in December 1997, Cisco’s

decision to acquire LighSpeed’s voice signalling technologies enabled the company to

provide solutions in both the enterprise and service provider markets as voice traffic

transitions from purely circuit switched networks to integrated circuit and packet/cell

switched networks. LighSpeed has developed leading-edge voice protocol conversion and

intelligent call control software which enables signalling to be transmitted among diverse

sets of voice protocols and applications. This technology allows different phone and

communications systems to work together in a seamless fashion, lowering communication

costs for both business and consumers.

In July 1997 Cisco signed a definitive

agreement to purchase the Dagaz xDSL business of Integrated Network Corp. INC, based in

Bridgewater, New Jersey, is a broadband networking company providing a suite of products

for high speed information transmission over existing copper phone lines. Cisco will

acquire INC’s Dagaz xDSL products and intellectual property, personnel, and other

x-DSL-related assets. The purchase of the Dagaz business, combined with Cisco’s xDSL

internal development, will give users a new carrier compliant fast lane on their networks.

In June 1997 Cisco acquired privately held

Ardent Communications. The San Jose-based Ardent is a pioneer in designing combined

communications support for compressed voice, LAN, data and video traffic across public and

private Frame Relay and ATM networks. The acquisition of Ardent will complement

Cisco’s 3,800 series within carrier service offerings for branch offices and remote

sites by extending leadership in integration of voice, video and data. In the same month

Cisco Systems family had a new member, i.e., Global Internet Software Group—a wholly

owned subsidiary of Global Internet.Com based in Palo Alto, California. Global Internet

Software is a pioneer in the Windows NT network security market-place. To complement

Cisco’s enterprise-class PIX firewall, Global Internet Software and its Centri

Security Manager Windows NT firewall is designed to meet the turnkey needs of small and

medium businesses that are often without security engineers to design, build and support

their networks offerings. In June 1997, Cisco announced a definitive agreement to acquire

privately held Skystone Systems Corp. of Ottawa, Ontario, Canada. Skystone is an innovator

of high-speed SONET/SDH technology. SONET/SDH is the emerging transport technology used

for carrying information in very high-capacity backbone networks, such as those operated

by telecommunications carriers and large ISPs. Cisco intends to leverage Skystone

development efforts on new SONET/SDH transport technologies for integration within

next-generation Cisco products.

In March 1997 it acquired Telesend, a

privately held company specializing in WAN access products in a stock swap in which shares

of Cisco stock were exchanged for all outstanding shares and options of Telesend. By this

acquisition, Cisco announced a new channel unit for D4 DSL Frame Muxes—the Cisco 90i.

Cisco 90i provides telecommunications carriers with a more cost-effective way to deliver

high-speed data services for the Internet and intranet access applications. The resulting

service is ideal for small business users, telecommuters and residential Internet access.

Till 1994 Cisco’s business was mostly

routers. Ever since, Cisco has moved up in the networking industry by acquiring small,

leading edge companies. It has improved its position in remote access devices in the same

way. Cisco will continue with its successful acquisitions thus delivering

better—anytime, anywhere solutions. Apart from these successful mergers, it is

Cisco’s relationship with its customers, who value Cisco’s commitment to making

sure that all the disparate pieces of the network mesh together. As Paul Krieger, an

analyst at the Seligman Communications and Information fund says "Cisco can sell cars

with square wheels and make a lot of money doing it."