Group 7 Theow Hee Ang | Philippe Cuendet | Andre Lehmann |Dimitrios Pliakos | Marina Viergutz
Group 7
Theow Hee Ang | Philippe Cuendet | Andre Lehmann |Dimitrios Pliakos | Marina Viergutz
Should Cisco acquire INS?
Agenda
• Cisco’s History• Cisco’s Business Segments• Cisco’s Strategy - Opportunity• INS Overview• Cisco vs. Lucent• Acquisition vs. Strategic Alliance• Transaction Cost• Parenting Fit
Revenues: USD 40.04 BN
Net Income: USD 7.76 BN
Employees: 70,714(fiscal year 2009)
Industry:
Computer Networking
Mission Statement:
Shape the future of Internet by creating unprecedented value
and opportunity for our customers, employees,
investors, and ecosystem partners
Values:
Dedication to Customer Success
Innovation and Learning
Partnerships
TeamworkDoing More with Less
2010
History
Len Bosack & Sandy Lerner founded Cisco
CEOJohn Morgridge
Bosack & Lerner sell all of their stock for $150 MN
CEOJohn Chambers
IPO
Revenues exceed
USD 1 BN
Revenues > $12.2 BN
20,000 employees
Top 5 companies (Market Capitalization)
August 1999
Should Cisco acquire INS?
Acquisitions & Joint VenturesProfessional & Market Oriented Organisation
1999 – It’s been 11 years
Birth of the €uro Birth of napster
Dow exceeds 10,000 and 11,000 for the first time
World Population exceeds 6 BN for the
first time
Cisco’s Business Segmentation
Big Corporations
Selling equipment that directs data around big corporate networks
Small and Medium Businesses
Cisco aims to be the leader in the gear for small businesses
Internet Service Providers
80% of the internet’s routers come from Cisco
Telephone Companies
Data and Telephone networks convergence.
40%
60%
- Market Size: $16.5 BN- Cisco’s SOM: 40%- # 1 in this market
18%82%
- Market Size: $13.6 BN- Cisco’s SOM: 18%- High competition
33%67%
- Market Size: $9 BN- Cisco’s SOM: 33%- # 1 in this market
1%
99%
- Market Size: $225 BN- Cisco’s SOM: 1%
- New entrant
Industry Segmentation
6% 5%3%
85%
Telephone Companies
Cisco’s great opportunity! Net-based technology = Innovation
Internet Service Providers
80% of the Internet’s routers come from Cisco
Small and Medium Businesses
Expected Cisco’s Growth Rate: +30%(growth of $0.7-1 BN per year)
Big Corporations
Expected Cisco’s Growth Rate: +35%(growth of $2.0-2.5 BN per year)
Cisco’s Strategy: What Industry – Business Segment?
1% 2% 3% 4% 5% 6%0
2
4
6
8
10
12
14
16
2.55
7.510
12.515
Cisco's Revenues in $ BN from the Telephone Companies’ Segment
(2000)SOM
2000 2001 2002 2003 20040%
10%20%30%40%50%60%70%80%90%
100%
20%
40%
60%80%
100%
Cisco's Revenues Growth (%) from the Telephone Companies’ Segment
(2001) SOM
(2002) SOM
(2003) SOM
(2004) SOM
(1999)SOM
If Cisco gains 1% percent Share of Market (SOM) in the Telephone Companies’ Segment every year, then by 2004 the company would have doubled its revenues
SOM: 1% (1999) vs. 6% (2004) - Revenues: $12.5 BN (1999) vs. $25 BN (2004)
Revenues: USD 300 MN
Net Income: USD 31 MN
Employees: 2,000
Industry:
Network Consulting Services
“the knowledge behind the network”
Cisco:
8.1% share of INS’s ownership
1998: The 2 companies entered into a
multi-year agreement
INS Focus: Phone Companies
Employees: 2,000
Engineers: 1,200
Cisco Certified > 200
1999
Cisco vs. Lucent
Revenues: USD 12.20 BN
Employees: 21,000
Revenue Margin: 65%(fiscal year 1999)
Revenues: USD 38.30 BN
Employees: 153,000
Revenue Margin: 49%(fiscal year 1999)
Why?
For every $1 spent on network Equipment, $2.5 is spent on Network Systems & Support
Acquisition vs. Strategic Alliance
Cisco: Horizontal Corporate Structure Lucent: Vertical Integration
Phone Companies prefer Vertical Integration: RELIABILITY & CUSTOMER SERVICE
Develop internal KNOW-HOWProtect the KNOWLEDGE created so far
Protect and enhance Cisco's Intellectual Capital = Key driver to the Phone Industry
Cisco needs to rethink its Business Strategy: VERTICAL INTEGRATION = ACQUISITION
Transaction Cost
Good Relationship – Long-term Partnership
INS’s Management Team will be integrated after the acquisition
Cisco’s IS platform grants new employees direct access to key information and service
+
+
Efficient Knowledge TransferEfficient Integration of INS
Parenting Fit
Linkages - Complementarity Special Expertise
Good Corporate Parents add value to the businesses they own.
Parenting Opportunities between Cisco & INS
INS will get access to Cisco’s broad Client Base
INS will synchronize its network solutions with the router infrastructure
sold by Cisco
Should Cisco acquire INS?
YES!
Q&AsGroup 7
Theow Hee Ang | Philippe Cuendet | Andre Lehmann |Dimitrios Pliakos | Marina Viergutz