News on an old friend:
Silicon Valley Executive Michael Ashby Comes Full
Cisco
By Kevin Petrie
Staff Reporter
9/15/99 5:30 PM ET
In a twist of Silicon Valley irony, Michael Ashby has found riches at the company
he fought for nearly three years.
In 1997, Ashby became chief financial officer of the then-struggling Internet
supplier Ascend and started waging war each day with powerful Cisco
(CSCO:Nasdaq). In June, Ascend, by then much stronger, was acquired by
telecom giant Lucent (LU:NYSE), another Cisco foe. But Ashby left to become
CFO of Cerent, expecting to help take the optical-network supplier public.
Instead, he found barbarians at the gate in the form of Cisco's M&A team. And
Ashby helped craft Cisco's $7 billion buyout of Cerent, a company with just $10
million in annual revenue. The deal was announced on Aug. 26.
Such is life in the Internet world.
"To a certain extent I'm disappointed, but how can you turn down a price like
that?" Ashby says.
True enough for Cerent -- and Ashby himself. He now has stock options in Cisco
that, while they haven't vested yet, are worth $124 million. (He scored $34 million
when Lucent acquired Ascend.)
Ashby's bizarre turn of fortune reflects the volatile life of an executive in Silicon
Valley, where job hopping is the norm, competitors become friends and friends
become enemies. Ashby's story also exemplifies how important chief financial
officers have become in today's economy.
CFOs are now offered stock-option stakes approaching 1.25% or more of their
companies, up from 1% earlier this year, according to executive recruiter Howard
Karr, who runs his namesake firm with his two daughters. Ashby's equity stake,
which vests over four years, equates to 1.7% of the total price Cisco is paying for
Cerent. Karr has approached Ashby in recent years but hasn't actually placed him
with a client. "He's an extremely qualified CFO candidate."
But now, Ashby, a reserved 50-year-old native of
Yorkshire, England, must work for a boss he never
expected. Cisco "has been the enemy for a long
time," says Ashby, a marathoner whose best time
is 3 hours and 30 minutes. Ascend is perhaps the
only network supplier that thrived in the face of
direct competition from Cisco.
Yet despite his history with Cisco, going along
with the deal wasn't a tough decision.
"From a shareholder perspective, Cisco stock is
probably the best currency you could have," he
says.
Also, Cisco was willing to build a business unit for
Cerent and retain its 287 employees. Ashby has
been impressed with Cisco's commitment to
branching into fiber-optic systems that transport
signals through the core backbones of networks.
Cisco currently builds routers and switches that dispatch signals from the network
edge.
Although his new role is still unclear, Ashby expects to work for Cisco CFO Larry
Carter. Thanks to a noncompete agreement with Lucent, Ashby likely will take a
mandatory vacation from Cisco until early next year, when it expires, though he
could start sooner and forfeit some unvested Lucent options. A Cisco official did
not return two calls for comment on Ashby's role.
Ashby is valued in part because he has earned the trust of colleagues. Carl
Russo, Cerent's chief executive, who himself worked for Ashby about five years
ago, says he wouldn't have committed to the Cisco deal without a nod from
Ashby.
Ashby earned much of his reputation with Wall Street during his tenure with
Ascend, which he joined in October 1997. The adolescent company had bungled
a product transition and encountered indigestion from its acquired unit Cascade.
With its stock down 60%, the company was giving confusing signals about its
health.
Ashby, previously CFO of the phone utility Pacific Bell (now part of SBC
(SBC:NYSE)), built Ascend's first formal budget process and promised to keep
profit forecasts consistent for everyone.
"He doggedly stuck to that," says Bill Rabin, an analyst with J.P. Morgan.
(Rabin's firm has no banking ties to Ascend.) Ascend went on to beat
expectations in four consecutive quarters and, by June 1999, its shares had
quadrupled.
Ashby also has operating experience, a rarity among CFOs, that he accrued
during a challenging stint as chief operating officer of Minneapolis-based Network
Systems. Ashby worked to turn around the company in 1994, controlling
expenses and rejuvenating the product line by developing new network routers and
switches. However, some board directors pushed to negotiate a merger with
Storage Technology (STK:NYSE). Ashby wanted to go it alone, but he
complied with the board's wishes, and the merger closed in early 1995. Network
Systems fell short of expectations in its final quarter as an independent company.
Russo, Cerent's CEO, worked for Ashby at the time. "Network Systems was a
very highly regarded company" that had a hard time hitting a home run, he said.
And "Michael was the one trying to swing the bat."
Now, he's in Cisco's on-deck circle |
