Cisco's Acquisition Strategy
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Case Code : BSTR083
Case Length : 12 Pages
Period : 2000 - 2004
Organization : Cisco
Pub Date : 2004
Teaching Note :Not Available
Countries : USA
Industry : Information Technology and Related Services
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
In late 1984, a group of computer scientists at Stanford University, led by Len Bosack (Bosack) and Sandy Lerner (Lerner), founded Cisco in California, US.
They designed an operating system software called IOS (Internet Operating System) that could route streams of data from one computer to another.
The software was loaded into a box containing microprocessors specially designed for routing. This was known as the router. Over the next couple of years, the scientists carried on with their full time occupations in the daytime and spent evenings working on the router.
What drew the team together was the confidence they had in the performance of their product and the challenge of working for a start-up company.
In March 1986, the first router was delivered. Cisco's router was far more
technologically advanced than other routers available in the market and was much
By November 1986, Cisco was earning revenues of $2, 50,000 per month.
By then, most of the scientists were involved full time in Cisco, having left
their lucrative jobs elsewhere.
Encouraged by the initial success, Cisco started seeking venture capital funding. The company also formed its management team. In 1987, Cisco appointed Bill Graves (Graves) as CEO and Lloyd Embry (Embry) as CFO.
In the same year, the company received funding of $2.5 million from a venture capital firm, Sequoia Capital in return for a 29.1% equity stake.
Sensing the need for a more professional leadership, Cisco's board appointed John Morgridge (Morgridge) as its CEO in November 1988. Morgridge roped in several key professionals and expanded Cisco's business in Europe and Japan.
He emphasized team building at Cisco and offered stock options to most of the employees, changing the policy of awarding stock options to only executive-level employees.
also made efforts to increase the diversity of Cisco's workforce. By
1988, Cisco's revenues reached $5.45 million. The company had 35 employees, with 12 out of them being engineers...