Contact: Brenon Daly
Through both direct and indirect cues, Cisco Systems’ John Chambers has created the impression that he’s about set to start wheeling a shopping cart up and down the Valley, grabbing technology companies with abandon. Folks who anticipate a dramatic return of Cisco to the M&A market have been busy putting together a shopping list for the company. (As has been well reported, the networking giant has plenty of pocket money; it current holds some $29bn of cash, and just raised another $4bn by selling bonds.) Most of the names on the list are ones that have been kicked around for some time.
For instance, fast-growing Riverbed Technology tops the list for some people. Indeed, Chambers approached the WAN traffic optimizer at least twice before the company went public in 2006, according to a source. We understand that talks ended with Riverbed feeling rather disenchanted with the giant. Other speculation centers on Cisco making a large virtualization play, either reaching for Citrix or VMware. The thinking on the latter is that Cisco would actually buy EMC, which sports an enterprise value of $21bn, to get its hands on the virtualization subsidiary. And last year we added another name to the mix, reporting that Cisco may have eyes for security vendor McAfee.
There’s a certain amount of logic to all of the potential acquisition candidates. At the least, speculation about them is defensible since they are all rooted in common sense. The only hook is that Cisco isn’t a ‘common-sense’ shopper. That’s not to say it isn’t an effective acquirer. Cisco very much is a smart shopper, and we’d put its recent record up there with any other tech company. What we mean is that Cisco’s deals are anything but predictable.
For instance, Cisco was selling exclusively to enterprises when it did an about-face nearly six years ago and shelled out $500m in stock for home networking equipment vendor Linksys. And it got further into the home when it followed that up with its largest post-Bubble purchase, the late-2005 acquisition of Scientific-Atlanta for $6.9bn. (Although word of the deal for the set-top box maker leaked out, few people would have initially put the two companies together.) Similarly, WebEx Communications wasn’t on any of the Cisco shortlists that we saw before the company pulled the trigger on its $3.2bn purchase of the Web conferencing vendor. But what do we know? Maybe some folks out there not only called one or two of those deals, but also hit the unlikely trifecta. If so, maybe you could email us to let us know – and while you’re at it, could you pass along some numbers for lottery picks?