Cisco's Chambers Speaks Out About Megadeals, According to Exclusive Report on Computer Reseller News Online (www.crn.com)
PR Newswire - April 01, 1997 16:43
FINANCIAL ASND CSCO CPR MLM PUB V%PRN P%PRN
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MANHASSET, N.Y., April 1 /PRNewswire/ -- Cisco Systems Inc.
(Nasdaq-NNM: CSCO) chief executive, John Chambers, said rivals 3Com Corp. and
Ascend Communications, Inc.(Nasdaq-NNM: ASND) will have their hands full with
their respective forthcoming mergers. In an exclusive report posted on CMP's
Computer Reseller News Online site (http://www.crn.com) at 2:45 p.m., Chambers
indicated that he probably would not have agreed to either deal.
"In mergers among fairly equal companies with different geographies, more
than 50 percent will fail," Chambers told CRN Online. "Both (Ascend and 3Com)
did their acquisitions for very logical reasons, but both merged with
companies of similar size and similar head count and with dramatically
different geographies. The challenges they have will be much tougher than the
challenges we face in our acquisitions with small technology companies or even
with StrataCom -- a company that was about one-fifth of our size [and] located
about 35 minutes away."
Chambers added: "Both mergers were ones that would have been extremely
aggressive for us. We probably would not have merged with equals."
Ascend announced this week its agreement to purchase Cascade
Communications Corp. in a deal estimated at $3.7 billion. The move follows
3Com's pending merger with U.S. Robotics Inc. for a whopping $6.6 billion.
"Chambers believes both transactions were spurred, at least in part, by
the long list of networking companies that his own giant networking vendor has
acquired," writes Ken Presti, Computer Reseller News Associate Editor. "The
most recent addition to the network market leader's hit list was last month's
purchase of Telesend Inc., previously a privately held xDSL company in
Cupertino, Calif."
"Once Cisco moved and 3Com saw how we were pulling away, they had to
move, and once they moved, it became even more important for Ascend to move,"
Chambers added. "Think about it in terms of musical chairs. You almost have
to move to stay a player, but if you move ineffectively, you miss having a
chair to sit on, and if you move too slowly, there are no chairs left when the
music stops."
Chambers believes that the industry already has voted in favor of fewer
vendors, or perhaps even a single vendor in major corporate enterprises.
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