Cisco’s M&A machine unplugged

While Brocade Communications has used its $3bn purchase of Foundry Networks to turn up the pressure on Cisco Systems, we would quickly add that Cisco itself has hardly used M&A at all this year. Typically one of the busiest corporate acquirers, Cisco has averaged about a deal per month in recent years. However, so far this year, the networking giant has acquired just one company, DiviTech. (In addition to last month’s purchase of the tiny Danish company, the only other announced move in 2008 was snapping up the 20% stake in its subsidiary Nuova Systems that it didn’t already own.)

Earlier this year, we noted that Cisco was rumored to be making a run at Citrix. Although that speculation initially helped boost Citrix shares, they have since sunk to a 52-week low. The decline over the past three months has shaved a half-billion dollars off Citrix’s market capitalization, representing a decent ‘rebate’ for any acquirer of the infrastructure software vendor. It currently sports a $5bn market capitalization. In the past, Cisco has shown itself ready to seal multibillion-dollar deals, including its $6.9bn purchase of Scientific-Atlanta in late 2005 and its $3.2bn acquisition of WebEx Communications in March 2007. Cisco is slated to report its fiscal 2008 results in two weeks.

 Cisco’s disappearing deals

Period Deal volume Deal value Notable acquisitions
Jan. 1 – July 21, 2005 7 $899m FineGround Networks, Airespace, Topspin Communications
Jan. 1 – July 21, 2006 4 $143m Meetinghouse Data Communications, SyPixx Networks
Jan. 1 – July 21, 2007 9 $4.2bn WebEx Communications, IronPort Systems, Neopath Networks
Jan. 1 – July 21, 2008 1 undisclosed DiviTech

Source: The 451 M&A KnowledgeBase

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