Cisco Systems: A Patient PredatorBy Baselinemag | Posted 2005-06-10 Print
The de facto networking supplier for many lacked a sophisticated wireless switch until it bought startup Airespace this year.
If it lacks a cutting-edge technology, Cisco often waits until the category starts to hit maturity—then swoops in and sinks its talons into an innovative startup in the field. Why spend R&D money hatching your own babies when you can have the pick of the market's fledglings?
In March, Cisco followed that modus operandi in buying Airespace, a 175-employee wireless switch startup, for $450 million. "Cisco might be a little slow out of the gate," says Jon Campbell, director of network services at FirstHealth of the Carolinas, a health services provider in 12 counties in North and South Carolina. "But they always seem to come back and jump over the competition rather quickly to overcome the deficit." Cisco plans to merge the Airespace technology with its current wireless networking products, which are the offspring of its 1999 acquisition of Aironet Wireless Communications.
Some Airespace customers have mixed feelings about Cisco's takeover. Mike Smith, CIO of Lee Memorial Health System, installed more than 100 Airespace access points at the company's three hospitals in southwest Florida in late 2004. "The good news is there are more resources to develop the Airespace technology," he says. "The bad news is that you become a commodity as a [Cisco] customer."
Longtime Cisco shops, though, say the company is very responsive. "If I have an issue, I call up my guy at Cisco, and boom—they're on it," says Darrell Walery, director of technology for Consolidated High School District 230 in Chicago's southwest suburbs.
But Cisco is also known for jacked-up prices. When Rod Luck, vice president of information technology at Pechanga Resort & Casino in Temecula, Calif., was evaluating wireless network equipment in 2003, Cisco's products cost about twice 3Com's. "The price/performance [ratio] with 3Com was much better," he says.
Others say putting their chips on Cisco is the safe bet. "For me, there was really no other option," says Brad Bourland, director of procurement and technology for the Houston Astros, who oversaw the rollout of a Cisco wireless network at the team's stadium last summer. "You can feel comfortable that Cisco has solid products, and that the company's going to be here tomorrow." Probably sniffing the wind for yet another acquisition, too.
Cisco operating results*
*Fiscal year ends in late July; FYTD reflects first nine months
Source: company reports
Total assets - $33.97B
Stockholders' - equity $23.76B
Cash and equivalents - 2.64B
Short-term investments - $2.40B
Long-term debt - None
Shares outstanding - 6.54B
Market value as of 5/27 - $126.5B
**As of April 30, 2005, except as noted
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