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 Industry:
Employees: 70,714 Computer Networking
(fiscal year 2009)

Mission Statement:
2010 Values:
Shape the future of Internet by Dedication to Customer Success
creating unprecedented value Innovation and Learning
and opportunity for our
customers, employees, Partnerships
investors, and ecosystem Teamwork
partners Doing More with Less
 History

Revenues > $12.2 BN

Revenues
20,000 employees
exceed
Len Bosack & Sandy Bosack & Lerner sell all of USD 1 BN Top 5 companies
Lerner founded Cisco their stock for $150 MN (Market Capitalization)

Professional & Market Oriented Organisation Acquisitions & Joint Ventures

August 1999
CEO CEO
John Morgridge IPO John Chambers Should Cisco
acquire INS?
 1999 – It’s been 11 years

Birth of the €uro Birth of napster

Dow exceeds World Population

10,000 and 11,000 exceeds 6 BN for the
for the first time first time
 Cisco’s Business Segmentation

Big Corporations Small and Medium Businesses

Selling equipment that directs data Cisco aims to be the leader in the gear
around big corporate networks for small businesses
- Market Size: $16.5 BN 18% - Market Size: $13.6 BN
40%
- Cisco’s SOM: 40% - Cisco’s SOM: 18%
60%
82%
- # 1 in this market - High competition

Internet Service Providers Telephone Companies

80% of the internet’s routers come from Data and Telephone networks
Cisco convergence.
- 1% -
33% Market Size: $9 BN Market Size: $225 BN
- Cisco’s SOM: 33% - Cisco’s SOM: 1%
67% - -
# 1 in this market 99% New entrant
 Industry Segmentation
Big Corporations
Expected Cisco’s Growth Rate: +35%
5%
(growth of $2.0-2.5 BN per year)
6%

3% Small and Medium Businesses

Expected Cisco’s Growth Rate: +30%
(growth of $0.7-1 BN per year)

Internet Service Providers

80% of the Internet’s routers come
85%
from Cisco

Telephone Companies
Cisco’s great opportunity!
Net-based technology = Innovation
 Cisco’s Strategy:
What Industry – Business Segment?
Cisco's Revenues in $ BN from the Telephone Cisco's Revenues Growth (%) from the Teleph
Companies’ Segment Companies’ Segment
16 100%
14 90%
80%
12
70%
10
60%
15 100%
8 50%
12.5 80%
6 10 40%
60%
7.5 30% 20%
4 2.5 40%
5 20%
2 10%
0 0%
1% 2% 3% 4% 5% 6% 2000 2001 2002 2003 2004
(1999) (2000) (2001) (2002) (2003) (2004)
SOM SOM SOM SOM SOM 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)
 Industry:
Revenues: USD 300 MN
Network Consulting Services
Net Income: USD 31 MN
“the knowledge behind the
Employees: 2,000
network”

Cisco:
1999
8.1% share of INS’s ownership Employees: 2,000
1998: Engineers: 1,200
The 2 companies entered into a
multi-year agreement Cisco Certified > 200
INS Focus: Phone Companies
 Cisco vs. Lucent

Revenues: USD 12.20 BN Revenues: USD 38.30 BN

Employees: 21,000 Why? Employees: 153,000
Revenue Margin: 65% Revenue Margin: 49%
(fiscal year 1999) (fiscal year 1999)

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

Cisco needs to rethink its Business Strategy: VERTICAL INTEGRATION = ACQUISITION

Protect the KNOWLEDGE created so far Develop internal KNOW-HOW

Protect and enhance Cisco's Intellectual Capital = Key driver to the Phone Industry
 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 Integration of INS Efficient Knowledge Transfer

 Parenting Fit

Good Corporate Parents add value to the businesses they own.

Parenting Opportunities between Cisco & INS

Linkages - Complementarity Special Expertise

INS will synchronize its network

INS will get access to Cisco’s broad
solutions with the router infrastructure
Client Base
sold by Cisco
Should Cisco acquire INS?

YES!
 Q&As
Group 7
Theow Hee Ang | Philippe Cuendet | Andre Lehmann |Dimitrios Pliakos | Marina Viergutz