Caso Cisco

Cisco Systems:
New Millennium – New Acquisition
Strategy?

03/2010-5669
This case was written by Nir Brueller, Adjunct Professor of Strategy and Affiliated Senior Research Fellow at INSEAD,
and Laurence Capron, Professor of Strategy at INSEAD and Research Director of the INSEAD-Wharton Alliance. It is
intended to be used as a basis for class discussion rather than to illustrate eithereffective or ineffective handling of
an administrative situation.
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Returning to his office in San Jose from theChristmas break on 2 January 2007, Richard
Palmer, Senior Vice President of Cisco Security Technology Group, was still reflecting on his
intense discussions over the past few months with Cisco Corporate Development Group about
the ongoing negotiations with Scott Weiss, CEO of privately-held IronPort Systems of San
Bruno (California). IronPort was the leading provider of email security solutions,focusing on
spam and spyware protection for the enterprise market.
By 2007, Cisco was the world leader in networking technology for the internet, having grown
from two employees with one product in 1984 to more than 63,000 people, 200 offices
worldwide, and 50 product lines. Its product portfolio consisted of several categories: network
systems (routers, switches, optical networking), datacentre (application networking services,
storage networking, data centre switches), collaboration, voice and video (voice and unified
communications, video, IPTV, cable and content delivery solutions), mobility/wireless
(access points, outdoor wireless, wireless LAN controllers) and security (firewall, virtual
private networks, security management). Cisco was also considered to be abest-in-class
acquirer of high-tech companies by industry experts as well as corporate strategy
practitioners.
Weiss had not yet accepted the handsome offer of $830 million made by Cisco. Palmer was
convinced that the price he had offered was justified by the great strategic fit of IronPort with
Cisco’s portfolio. The security products and technology from IronPort added a rich and
complementary suite ofmessaging solutions to Cisco’s industry-leading threat mitigation,
confidential communications, policy control and management solutions. At a meeting with
Cisco’s Corporate Development team in December 2006, Palmer explained:
“We feel there is enormous potential for enhanced e-mail and message protection
solutions to be integrated into the existing Cisco Self-Defending Network
framework.Using the network as a flexible platform to integrate IronPort’s
technologies, Cisco will be able to build new security applications as customers’
demands evolve”1
Palmer wondered how he could further negotiate with Scott Weiss to clinch the deal. During
the last meeting, Cisco Corporate Development Group, which had forged a great reputation
over the years for providing discipline on theacquisition process, had made it clear that the
proposed $830 million was the walk-away price. Among the non-price factors, Palmer had to
negotiate a number of post-acquisition “integration” issues. In particular, he knew that
IronPort was keen on remaining a standalone business unit within Cisco. Weiss wanted to
retain the relationships and go-to-market strategies that he had built. Although theIronPort
acquisition offered opportunities to weave together the two firms’ technologies, it represented
a significant stretch from Cisco’s security strategy, moving it from the network to the
application layer.2 Furthermore, despite Cisco’s interest in IronPort’s subscription-based
pricing model, it had no real experience with it. Lastly, there was also internal resistance
within IronPort’s...