Cisco says its success rate with acquisitions is 70% while 90% of them fail for the rest of the industry.
Slideshow: 25 years of networking
Perhaps its success is due to the fact it acquires so many companies - 144 to be exact, since 1993. With that kind of experience, getting it right might come second nature.
Then again, right is in the eye of the beholder. Many officials from the acquired companies defect from Cisco for a variety of reasons - one of which is, they are serial entrepreneurs who thrive in a start-up environment instead of an established, multi-layer structure like Cisco's.
Cisco CEO: John Chambers talks about how things have changed in the past 25 years
These renegades form other start-up companies that experience varying levels of success or failure - sometimes they are even bought up again by Cisco! Our estimates are that Cisco has spawned at least 14 such companies since 1993.
That year, it all started with the purchase of Crescendo Communications, a maker of Ethernet switches. Not only did Cisco obtain technology that would eventually put it in a dominant position in Ethernet switching, but the company inherited some key executives that would help grow and solidify that dominance.
Mario Mazzola and Jayshree Ullal joined Cisco from Crescendo, and both were instrumental in building Cisco's switching business into the $15 billion behemoth that it is today. Mazzola then "left" Cisco to spawn two companies started-up and spun back into Cisco - Andiamo Systems, which ushered Cisco into the storage area networking arena; and Nuova Systems, which developed the Nexus 5000 Fibre Channel-over-Ethernet switch.
Ullal spent the next 15 years at Cisco before leaving to join data center switch start-up Arista Networks, which was founded by Andy Bechtolsheim, who joined Cisco with its acquisition of Granite Systems in 1996. Bechtolsheim left Cisco in 2003 to head another start-up he founded, Kealia.
Another key switching acquisition by Cisco was that of Kalpana in 1994. Kalpana was a pioneer and leader in Ethernet switching, and firmly established Cisco as a leader in that market. Cisco also inherited a key company executive, Charlie Giancarlo, who would lead various operations at Cisco and be considered as the heir apparent to CEO John Chambers, until he left the company in 2008.
Kalpana also helped spawn an intriguing Cisco competitor in 1996. Kalpana co-founder Larry Blair and Cisco executive Larry Lang helped drive the formation of Ipsilion, a start-up proposing that IP traffic be switched at wire-speed instead of routed to reduce bottlenecks in enterprise networks.
Ipsilon came out of the chutes with lots of anti-Cisco and ATM Forum bluster, and tons of hype, and while its technology was intriguing and its management team well-respected, the company withered on the vine. It couldn't generate the sales to keep up with the hype, and in 1997 it was sold to Nokia for $120 million.
Cisco had a few more interesting and influential acquisitions in the 1990s. It acquired frame relay powerhouse StrataCom in 1996 for $4 billion. StrataCom gave Cisco instant presence, and leadership, in the service provider data services market, specifically frame relay. But aside from acquiring its way into StrataCom customer AT&T, Cisco didn't realize much more momentum from the StrataCom deal.
With the advent of the Internet and the World Wide Web, data services were already migrating from Layer 2 frame and ATM to Layer 3 IP. And Cisco had some missteps along the way as well, having torpedoed a strategic WAN offering and not having a clear and coherent WAN strategy after the StrataCom buy.
But StrataCom may have spawned Cisco's most challenging competitor yet - Juniper Networks. Scott Kriens, chairman and former CEO of Juniper, was a vice president of sales and operations, and a co-founder of StrataCom. He left the company shortly after Cisco acquired it.
While leading Juniper, the company swiped about one-third of Cisco's share in the service provider router market since 1997. Juniper is also competing with Cisco in enterprise routing and switching, and executives and engineers regularly switch allegiances and employment between Cisco and Juniper.
Cisco also made a series of optical acquisitions in 1999, with varying degrees of success. The most successful was Cerent, which was purchased for $6.9 billion and firmly entrenched Cisco in the metro SONET and WDM optical transport market. But Cerent CEO Carl Russo was assigned to report to Jayshree Ullal at Cisco and not long afterward, he left to form Calix, a maker of local loop bottelneck breakers for service providers.
The two optical acquisitions that failed were Monterey Networks, formed by former Cisco executive Michael Zadikian, and Pirelli Optical Systems. Cisco ended up killing off the Monterey Wavelength Router when demand failed to materialize. And in 2005, Cisco discontinued the long-haul DWDM product line it obtained from the Pirelli acquisition.
The 2000s saw a flurry of high-priced and high-profile acquisitions from Cisco, typically in new and emerging markets the company targeted for high-growth while its core router and switch business kept the cash coming in. The Linksys acquisition in 2003 formed the basis of Cisco's home networking and entertainment venture.
Scientific-Atlanta expanded on that in 2005 by giving Cisco a market leader in cable set-top boxes - albeit for about $7 billion!. WebEx gives Cisco a foundation in collaboration and a new SaaS delivery model to experiment with.
Pure Digital gave Cisco a nifty little pocket videocam to sell to consumers in an effort to help drive more video content onto the Internet so that ISPs would have to buy more Cisco routers and switches to handle it. But recent financials are prompting some to ask if Cisco should flip Flip?
Perhaps a more strategic and better fitting video acquisition was that of enterprise videoconferencing leader Tandberg in 2009. Cisco took its lumps with this one though, as some Tandberg shareholders balked at the buy, forcing Cisco to raise its price for the Norwegian company.
And in the same week that Cisco acquired Tandberg, it announced another multibillion purchase: Starent Networks, maker of an evolved packet core gateway for 4G/LTE wireless operating networks. Starent's products, now known as the Cisco ASR 5000, manage access from 2.5G, 3G, and 4G wireless networks to a mobile operator's packet core network.
Cisco scooped Starent up out from under Juniper's nose. Juniper and Starent had a partnership to develop an evolved packet core system for AT&T. Cisco's purchase forced Juniper to revisit its evolved packet core strategy, which ultimately resulted in the MobileNext offering from its Project Falcon development.