Personally, I'm amazed at just how many of Cisco's competitors seem to be total pushovers whom always appear to raise a "white flag of surrender" not long after Cisco invades their market space.
So imagine my surprise when I received the following scrappy email from a Cisco rival listing Cisco’s top 5 worst technology moves:
Hi Brad,
Hope you are well. In light of Cisco’s recent Unified Computing System announcement, wondering if you might be looking for some blogging fodder.
Cisco has a blog up entitled "Unified Computing: Beware of the Naysayers" in which the blogger argues that naysayers sound suspiciously like the same bunch that didn’t give Cisco any chance of success in the voice market and the SNA-to-IP migration specifically.
Cisco likes to frame this by talking about "catching market transitions" as in Cisco has the ability to foretell the IT future and out-execute everyone before they even know what hit them. So, with gift of prophecy like this, there is no way Cisco can ever get it wrong, right?
Well, not so fast. Indeed, for all of its good strategies, Cisco’s history is littered with bad decisions and moves that you (not surprisingly) don’t hear about and therefore may not know about.
In fact, here’s a Top 5 list of the worst technology moves Cisco has made within just the last 10 years:
5. Application Oriented Networking
Perceived Opportunity:
Arguably Cisco’s first toe dip in the server arena. AON was supposed to unify, simplify and amplify (sound familiar?) the middleware sprawl that supposedly plagued system vendors.
Key Acquisitions/Investments:
Development of a AON-specific business unit, a rogue group of sorts led by a former IBMer Taf Anthias.
Result:
Taf reported directly to the chief development officer at the time (Mario Mazzola) instead of Charlie Giancarlo, who led the data center and infrastructure groups, the logical fit for AON. Politics really hurt this group along with really bad technology that never worked. Within a couple of years AON was technology non grata.
4. Infiniband
Perceived Opportunity:
A "protocol agnostic" attempt to be everything to everyone by offering IB as a high-speed, server-to-server interconnect to complement its 10 GbE and Fibre Channel offerings.
Key Acquisitions/Investments:
TopSpin ($250M).
Result:
Infiniband is still very niche and Cisco doesn’t ever talk about this technology anymore. Actually, the crown jewel of the TopSpin deal was actually supposed to be its VFrame, data center orchestration platform. Alas, VFrame (after 4 versions) never really did anything significant and didn’t even seem to have a role in the Project California solution.
Perceived Opportunity:
Cisco thought iSCSI was going to be the "killer" technology that would supplant Fibre Channel everywhere and kill off that market. Then it decided on a "if you can’t beat ‘em, join ‘em" strategy of building its own line of Fibre Channel switches.
Key Acquisitions/Investments:
NuSpeed ($450M), Actona ($82M), Andiamo Systems ($1.4B in a controversial "spin-in" deal that made a handful of executives and engineers very rich, much to the disdain of many others).
Result:
After more than six years, Cisco only reached a distant second place in the market by default (there was nobody else left) and never came close to its goal of 50%+ marketshare within 3 to 5 years of market-entry, as required by its "advanced technology" strategy.
2. Content Switching/Networking
Perceived Opportunity:
Cisco’s first attempt to corner and dominate the L4-7 market.
Key Acquisitions/Investments:
ArrowPoint ($5.7B), Netiverse ($210M), SightPath ($800M) total of $6.7 billion in stock and cash.
Result:
Very diffused product strategy, with bits and pieces being of marginal technology being distributed all over the company.
Perceived Opportunity:
Cisco’s attempt to corner and dominate the L1 (physical transport layer) market in the frenzied heyday of the "fiber glut" build-out of optical cables.
Key Acquisitions/Investments:
Cerent ($6.9B), Qeyton ($800M), Pentacom ($118M), Pirelli ($2.15B), Monterey Networks ($500M), StratumOne ($435M) total of $10.9 billion in stock and cash.
Result:
Cisco’s enterprise/metro DWDM business was a complete flop with Cisco never reaching top marketshare position in a highly fractured market. Gained better traction in the MSSP (service provider) market but can hardly be characterized as a qualified success.
What's your take, is this scrappy Cisco rival spot on, or totally whacked in its list of Cisco's top 5 worst technology moves?
BradReese.Com Cisco Refurbished
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Close..
Of course not all of Cisco's picks were right. They just have to be more right then wrong.. :) The one thing I would argue with in the email above is the acquisition of TopSpin. I don't think Cisco thought that IB was going to be serious in the data center, or at least I sincerely hope they didn't think that. I think the thought process there might have been to stall the market until Data Center Ethernet/Low Latency Ethernet was available. That is worth 250 Million, if it stalls the market for a few years and lets you sell more 6500's in the meantime.
I don't know enough about the other acquisitions, but I would venture a guess that all is not as it seems with all of them.
Of course, there run by humans, and last time I checked, humans make mistakes also. :)
More About InfiniBand
Thanks, interesting observation.
More about InfiniBand according Wikipedia:
Sincerely,
Brad Reese
BradReese.Com Cisco Refurbished
You forgot a few...
Lets not forget Altiga and Compatible for VPN Concentrators, while at least the Altiga product had a short run (VPN 3000's), the Compatible (VPN 5000) never hit the ground running.
How about Vector Ortogonal Distance Vector Multiplexing...also known as Clarity...Cisco paid a pretty penny for this non-line of site wireless technology that never worked.
There was that company that made DVD Players, the name escapes me right now, but that never seemed to be integrated into the Linksys products.
But the best is the 2 social networking companies that they bought and never did anything with...
More on the Altiga Acquisition
More on the Altiga acquisition from Network World:
It’s the really big deals where Cisco seems to stumble.
When it bought ArrowPoint Communications in 2000, the dot-com bubble was at its peak, and the advanced Layer 4-7 switching technology ArrowPoint had was a hot commodity. (Nortel bought its top rival Alteon for $7.3 billion.) Since 2000, analysts estimate that Cisco has sold around $1.3 billion in content switching gear - about a 22% return on the investment.
In optical, Cisco spent $2.15 billion on optical gear maker Pirelli and a combined $7.4 billion on optical router start-ups Cerent and Monterey. According to the Dell’Oro Group, Cisco’s total revenue in optical networking since it entered the market is around $3.25 billion.
"It’s not quite the return Cisco probably expected," when it invested almost $10 billion in optical, says Dell’Oro senior analyst Jimmy Yu, who tracks the optical market.
But if any vendor knows how to do buyouts overall, it’s Cisco.
"When [Cisco] acquires a company," Chambers said previously, "we are acquiring a next-generation product or technology, but we're also acquiring people," usually at a cost of around $1 million per person. He said that most acquisitions in the industry see 40% of employees of the acquired company leave after two years, while Cisco has kept its attrition rate of acquired employees at around 2%.
"It is hard doing acquisitions," Chambers said. "You have to have the right culture and you have to have a process."
Sincerely,
Brad Reese
BradReese.Com Cisco Refurbished
Clarity Acquisition
It appears Cisco paid $157 million for Clarity:
Sincerely,
Brad Reese
BradReese.Com Cisco Refurbished
DVD Player Acquisition
You appear to be referring to Cisco's acquisition of KiSS Technology, which cost $61 million:
Sincerely,
Brad Reese
BradReese.Com Cisco Refurbished
Acquisitions
It would be interesting to see how Cisco moves compare with there competitiors...how do you quantify a good acquisition from a bad one in case where it was suppose to stall the market, keep technology away from competitors or use of a subset of the acquisition's technology to augment/enhance an existing product line
Batting average
Cisco in no way gets it right more than they get it wrong. The sad thing is that no matter how bad Cisco is at acquiring companies they only have to get it right a fraction of the time. One home run makes up for a helluva lot of strike outs. Unfortunately, in the process, Cisco wastes enormous amounts of capital, demoralizes it's most loyal and talented employees, and worst of all, internally rewards and promotes those who happen to randomly be at the right place at the right time. Ridiculous and unsustainable way to run a company. Madoff kept his ponzi scheme going for 25 years. Maybe Cisco will be as lucky too...
unsustainable?
Cisco has been around for over 30 yrs now, and has made a VERY sustainable business out of build/buy. They are the prototype for how to do acquisitions, and have had numerous books written about their ability to do so. Cisco is a case study company when it comes to acquisitions.
Cisco has been around for over 30 yrs now?
You state:
Geez, it seems to me that it was not too long ago that I can remember the day when Cisco was only 25 years old.
Sincerely,
Brad Reese
BradReese.Com Cisco Refurbished
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