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Tuesday, December 28, 2004

Cisco Acquisitions Strategy - Software Is The Future

Recently we covered the future growth prospects and the direction that cisco would be taking moving forward.Oligopolywatch writes Cisco Systems appetite for acquisitions remain unabated.Cisco Systems, the dominant player in the market for network routers and switches, is a major success story. While it was the darling of the 1990s bubble, it is still a very successful firm with $22 billion in income and $4.5 billion in net income, and is #100 in the Fortune 500. Much of Cisco's growth has come though acquisitions, numbering almost 100 in its decade of existence. The company acquired when its stock price was stratospheric, and it continues to acquire now that its stock price is more reasonable. In spite of its hunger to acquire, Cisco has stayed very close to its core strengths, communication and security hardware and software. But that core area has extended in recent years to such areas as teleconferencing, Internet telephones (VOIP), and home networking.
Writing about Cisco, CNET.com wrote, "Acquisitions have been the lifeblood of Cisco's growth. From its early days, when it branched out from its router focus to build a multibillion-dollar switching business through acquisitions to its current strategy of buying its way into the optical networking market, the company has used its high-flying stock to access new market niches".
The stock isn't flying so high anymore, but with 14 acquisitions in 2004, the company philosophy hasn't changed much.It's possible to see Cisco as an engine for acquisitions, swallowing up nearly all the new relevant ideas that pop up in small start-ups, then integrating those ideas into its product line. Many of the acquisitions have been relatively inexpensive, though over the years that have been several multibillion dollar deals, including those for companies like Cerent and ArrowPoint Communications.
The 2004 acquisitions include:
- Protego, which makes data security monitoring equipment aimed at small to
mid-size businesses
- BCN Software, which offers network routing software
- Jaki Networks, which sells networked device management tools
- NetSolve, with its remote network management software
- P-Cube, that offers software for management for IP service providers
- Dymanicsoft, software for providing VOIP services
- Perigo, a company that makes something called admission control software,
used to defend networks form attacks.
- NetSolve, a provider of software for remote network management and secure
- The UK's Parc Technologies, Ltd., which makes software for data traffic
routing optimization
- Actona Technologies, which makes wide-area file management software
- Twingo Systems, a maker of software for protecting secure network transactions
- Riverhead Networks, a maker of software to protect servers from
"denial of service" attacks
- Procket Networks, which develops router software
- Latitude Communications, a provider of online conferencing software

As the venerable Om Malik points out,Only Procket was a hardware vendor. Perhaps like all hardware vendors, Cisco is realizing that the future is software, not hardware which is becoming increasingly commoditized.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
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