Bankers in Cisco/Tandberg deal set to divvy up $39M in fees

Interestingly, Cisco's M&A Chief Ned Hooper disparages using "consensus" when doing deals.

According to a Reuters story today, Cisco's M&A advisers on the Tandberg deal - Lazard and Carnegie, can expect to split fees of $17 to $19 million.

Furthermore, dealmaker Freeman & Co. is predicting that Tandberg's financial adiviser - JPMorgan, will rake in fees of $18 to $20 million from the deal.

Breathtakingly, earlier this month, I was both stunned and flabbergasted to read in TheDeal.com that Cisco's M&A Chief Ned Hooper had incredulously stated:

"The best deals are never done by consensus. Through over 70 deals I've sat in on -- I noticed the best deals are done when you have some risk and foresight. So if you have consensus about a deal, you're probably late to a market."

Why was I so stunned and flabbergasted by Hooper's statement above?

Well, Hooper is considered by many to be the heir and future replacement for John Chambers as Cisco's CEO. So to have Chambers' potential future replacement "lambast in public" the consensus approach as ordained by Chambers' much ballyhooed management committees, councils and boards is quite spectacular (at least in my opinion).

Also of interest to me today was the research report from RBC Capital Markets Managing Director - Mark Sue regarding Cisco's upcoming Financial Analyst Conference 2009, "Cisco will present its case for top-line growth and its strengthening competitive positioning at its analyst day next Tuesday. Gross margins may be addressed in detail as investors remain concerned about an impending pricing war in the enterprise segment following HP's acquisition of 3Com and IBM's expanding OEMs. Cisco's P/E is currently 16.2x the consensus CY10E EPS of $1.48 vs. large cap tech peers' 14.5x, yet Cisco maintains $4.27/share in cash and is generating $1.5B/quarter. P/E ex cash and unlevered earnings is just 14x.

"Cisco will likely reiterate its LT growth rate of 12-17% and various new markets to swing the top-line needle. For the current quarter, consensus estimate is for +4% sequential growth. Debate persists as to whether Cisco's strong January quarter may be followed by a dip in April. Considering the pipeline of enterprise activity and broader network upgrades, we're constructive on the April quarter. The April quarter is also when the YoY comparisons start improving (our estimate +14% YoY and excluding Tandberg.)

Sue continued, "Investment priorities remain video, collaboration, virtualization, data center, and globalization. Video is also taking up a disproportionate amount of carrier capacity, both wireline and wireless. One segment that may be lagging, however, is the original SFA business: set-top boxes and infrastructure (~6%). Poor housing starts and a lack of urgency by carriers are to blame. Cisco for its part has been taking a while to be a dual source vendor at Verizon for FiOS. Comcast/NBC Universal's integration may also delay capex."

Sue added, "Contrary to concerns about pricing declines, we're just not seeing it. This can change since HP intends to aggressively combine its ProCurve offering with 3COM's solutions. IBM is aggressively expanding its 'Anyone but Cisco' initiative with Juniper and Brocade. Although IBM senior management is eager to displace the ~$1.3B in Cisco sales per year, it's a different story at the field level with IBM sales still recommending Cisco."

Sue concluded, "Next year may bring further traction with Cisco's UCS and an expanded relationship with key partner EMC, which could help Cisco's multiple to decompress. Defensible margins and a variable cost structure result in our CY10 EPS of $1.44, which we believe may prove conservative."

Related Story:

Cisco wins Tandberg with 91.1% stake

Do you agree with Ned Hooper that the best deals are never done by consensus?

And as a potential future Cisco CEO, do you believe Ned Hooper would dismantle Chambers' much beloved management committees, councils and boards, should Hooper replace Chambers?

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• Cisco
• LANs / WANs
• Cisco's M&A advisers on the Tandberg deal - Lazard and Carnegie
• Cisco's M&A Chief Ned Hooper
• Cisco's upcoming Financial Analyst Conference 2009
• Dealmaker Freeman & Co.
• Tandberg's financial adiviser - JPMorgan