Chapter 7: Merger and Acquisition Strategies 229
centrally from a set of cloud servers. For instance, if you
are a guest at a university or other company campus it
supports, you can bring your own personal device into the
network, which allows guest networking and facilitates
application controls. It manages the firewall and other
advanced networking services to protect security as well.
John Chambers, Cisco CEO, has helped the firm
move through the many transitions noted earlier. In the
IT sector, 90 percent of acquisitions fail. However, as
Chambers notes, “although Cisco does better than anyone
else, we know that a third of our acquisitions won’t work.”
Chambers worked for companies that did not successfully
make transitions. Wang Laboratories missed a transition,
and after experiencing this as an executive, Chambers
learned to have a “healthy paranoia.” He adds, “more than
anything, I’ve tried to make Cisco a company that can
see big transitions and move.” One way they do this is to
“listen to the customers very closely” to understand the
necessary changes.
As Cisco makes the transition into the all-every-
thing network, not only must it manage the cloud,
but it also must provide service to the mobile devices
that work in cellular networks. Accordingly, Cisco also
acquired Intucell, a self-optimizing network software
developer, for $475 million. It likewise acquired Truviso,
Inc., a provider of network data analysis and reporting
software, for an undisclosed price (Truviso was partly
owned by venture capital firms and was headquartered
in Israel). Most recently, Cisco acquired Ubiquisys,
which cuts cellular carriers’ costs “by shifting traffic
from congested towers to more targeted locations inside
an office, home or public space, which also boosts the
service’s reliability.” This shifting-traffic approach is
especially efficient when seeking to improve “coverage
in crowded areas such as stadiums, convention centers
and subway stations.” These acquisitions help cellular
network customers manage their products in the net-
work more efficiently in the delivery of data, e-mail,
and video services. As you can see, for this series of
acquisitions, Cisco has used acquisitions strategically
to move into new areas as its environment changes, to
learn about new technologies, and to gain knowledge
on new technologies as it experiences these transitions.
In the process of this rapid change, Cisco has devel-
oped a distinct ability to integrate acquisitions. When
Cisco contemplates an acquisition, along with financial
due diligence to make sure that it is paying the right
price, it develops a detailed plan for possible post-
merger integration. It begins communicating early with
stakeholders about integration plans and conducts rig-
orous post-mortems to identify ways “to make subse-
quent integrations more efficient and effective.” Once
a deal is completed, this allows the company to hit the
ground running when the deal becomes public. Cisco
is ready “from Day 1 to explain how the two companies
are going to come together and provide unique value
and how the integration effort itself will be structured
to realize value.” The firm does not “want the [acquired]
organization to go in limbo,” which can happen if the
integration process is not well thought out. Also, during
the integration process, it is important to know how far
the integration should go. Sometimes integration is too
deep, and value that was being sought in the acquisi-
tion is destroyed. Sometimes it may even pay to keep the
business separate from Cisco’s other operations to allow
the business to function without integration until the
necessary learning is complete. “Cisco learned the hard
way that complex deals require you to know at a high
level of detail how you’re going to drive value.”
Sources: L. Capron, 2013, Cisco’s corporate development portfolio:
A blend of building, borrowing, and buying, Strategy & Leadership, 41(2):
27–30; D. FitzGerald & S. Chaudhuri, 2013, Corporate news: Cisco
doubles down on small-cell transmitters with Ubiquisys, Wall Street
Journal, April 4, B7; T. Geron, 2012, Meraki-Cisco deal a boost for
Sequoia, Google-connected VCs, Forbes, November 19, 18; R. Karlgaard,
2012, Cisco’s Chambers: Driving change, Forbes, February 22, 68;
A. Moscaritolo, 2012, Cisco to acquire TV software developer NDS for
$5 billion, PC Magazine, March 1; B. Worthern, D. Cimilluca, & A. Das,
2012, Cisco hedges bet on video delivery, Wall Street Journal, March 16,
B1; R. Myers, 2011, Integration acceleration, CFO, 27: 52–57.Case Discussion Questions
- Of the “Reasons for Acquisitions” section in the chapter, which
reasons are the primary drivers of Cisco’s acquisition strategy? - Of the acquisitions Cisco has completed, which ones are hor-
izontal acquisitions and which ones are vertical acquisitions?
Which of these acquisitions do you believe have the strongest
likelihood of being successful and why?
3. Explain John Chambers’ views about acquisitions. How have
his views affected the nature of Cisco’s acquisition strategy?
4. Describe the core plan Cisco has in place to guide the inte-
gration of an acquired firm into its operations. What are the
strengths of this plan, and what are its potential weaknesses?