Cisco’s Post-Tandberg Acquisitions to Maintain International Flavor

Having just announced its pending $3-billion purchase of Tandberg, the Norway-based videoconferencing specialist, Cisco CEO John Chambers indicated yesterday that additional acquisitions with an international flavor are in his company’s near-term future, according to a Light Reading report.

Given that Cisco has $29 billion in cash overseas, as opposed to $6 billion in the USA, the company’s plans for global expansionism don’t come as a suprise.

As for acquisition targets, Chambers said Cisco wants to become the go-to company in two areas: collaboration and video. If collaboration and video occur together, as with telepresence and videoconferencing, so much the better.

In buying Tandberg and in continuing to look for deals outside Silicon Valley (and outside the USA), Chambers and company are flouting their traditional rule of making acquisitions within close geographic proximity to Cisco’s headquarters in San Jose. It’s a rule they’ve broken before, but not often. Never before, for example, has Cisco made an overseas acquisition the size of the Tandberg deal.

Chambers says the Tandberg deal was a worthy exception, that the cultures of the two companies are compatible and that integration won’t prove problematic. We’ll see. There’s already been talk about which Cisco executives might be sent to Norway to assist Tandberg CEO Fredrik Halvorsen.

Notwithstanding the Tandberg buy, Chambers says he still adheres to his credo of partnering with big companies and buying small ones.

Said the Cisco boss:

“I like the size of the acquisition we just announced, or small startups that have just 100 engineers. In our alliances, you will see us getting tighter with [partners such as] Accenture , EMC Corp., Wipro Ltd…. Large acquisitions just don’t work.”

All the qualitative and quantitative studies on the subject say he’s right. It’s far more difficult to successfully execute and integrate a large acquisition than a small one. The odds of failure rise exponentially with the size of any acquisition.

To recap, then, Cisco’s next acquisition targets are likely to be collaboration or video companies based overseas, most likely in Europe, with 100 or fewer engineers. I’m sure a few VC firms have candidates they would be more than willing to bring to Cisco’s attention.

It’s a good thing Cisco has chosen to look overseas for those buys. As one wag commented at Light Reading, severely constrained VC funding and economic hardship have combined to practically wipe out American startups with that profile.


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