Cisco shutters Cerent HQ in Petaluma, CA

Cisco had big plans for Cerent at the time of the acquisition, as well as for its other optical acquisitions, Monterey Networks and Pirelli. Unfortunately, they squandered the great opportunity they had by decimating the ranks of talented managers who came with those acquisitions, consistently under-funding their optical product development, and dragging their heels (mainly due to internal politics) with integration of their optical capabilities into other product lines. Cerent was showing a lot of promise back in '99. It's too bad that it ultimately didn't go anywhere inside Cisco.

Cerent is not the first time Cisco has missed the ball. One that comes to mind was the $325M buyout of WebLine Comm back in 1999. WebLine was a collaboration tool that linked into their IP phones and call centers. Development was dropped just a few years later and the operation shut down.

By now there were about a dozen people in Petaluma. Development over the past 10 years had simply shifted to Cisco's main locations. So this was basically a real-estate transaction. DWDM has never been developed out of Petaluma. This author obviously didn't speak to a single person within Cisco.

All of sustaining efforts is now done in Bangalore as the second biggest Cisco site after SJ HQ.

Actually, in early '00, the biz was increasing, but due to internal politics between leaders in SJ and Petaluma, the site now is the victim. If Cisco retains the site and grows it, including developing new products, it could have retained good talents and save cost. Most of the talents left the company or relocated to SJ site because the rumor of closure has been there since 2005.

This is a facilities issue vs. a technology issue. Cisco continually evaluates its business to improve efficiency and ensure it is aligned to capture growth opportunities and drive key initiatives. Our Petaluma site was closed in July 2009 as part of our continual business evaluation. Existing Cisco products that the Petaluma team had been working on have transitioned to other Cisco locations. In fact, the team working on the ONS 15454 optical platform, which had originally been developed in the Petaluma facility, was transitioned to other Cisco locations four years ago.

With over 100,000 ONS 15454 units deployed along with market leadership in such areas Metro WDM, ROADM and P-OTP markets, optical technologies continue to play an important part of our overall IP Next Generation Network portfolio for our service provider customers worldwide.

Jim Brady
Cisco Service Provider Public Relations

To any readers of this author, please take anything this person writes as being highly suspect.

It is amazing how a real estate transaction - unloading an empty building - is considered a market bust.

Cisco's Acquisition of Cerent was an exercise of interoperability development between different systems to provide the customer the entire solution. With the Cerent Platform and Pirelli Platform merged - Cisco has found a way of providing a chassis that is more versatile than anything out there (Hybrid SONET/SDH,DWDM,RAN and L3 capabilities).Surely you fail to see that Cisco has more sites (since that is all you care about) working on this platform!

Came across this article and subsequent thread and given my previous "Cisco insider" status, thought I'd weigh in...

Cisco's closure of the Petaluma site is truly a facilities issue as the Cisco spokesperson noted. The failure there is really that Cisco purchased extensive real estate holdings in Petaluma (and other markets) but has subsequently retrenched to San Jose and India. Those real estate holdings may yet prove to be winners, but currently are under water at many sites.

The Cisco optical business (Cerent, Pirelli, and a few home grown products) was once a $1B+ annual business. That run rate played out immediately upon acquisition and was sustained for several years, but started to decline in '02-'03 window as the market softened and competing products chipped away share. Monterrey was never a winner (i.e., $0 in sales)...that was definitely $500M in stock down the drain.

By '02-'03, most of the optical savvy leaders were gone. Cisco's optical business has been in a fairly steady decline since.

Was it worth the $7B (in the '09 price of its stock, not cash of course)? For Cisco shareholders the amount of optical product sold has been >$7B (not less than $7B as the author would lead us to believe) if that's any metric to use. But the amount of overall Cisco products into those customers, and the barrier to entry for other competitors, has been absolutely enormous (see the history of Nortel if this point isn't understood).

Nortel, Lucent, Alcatel, Ciena, NEC, ADC, Positron, Fujitsu, Hitachi...all built or acquired competing products that were complete failures (Cyras, Chromatis, Astral Point... anyone?). But some of these competitors have re-tooled and are now the leaders. Kudos to them for perseverance and focus.

Cisco didn't keep it's optical team together, it allowed internal big company politics to spoil product plans and investment, and the result ten years later is an ongoing decline in the business. Probably time to fold up shop given that CSCO is not #1 or #2 in the market.