SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Technology Stocks : Lucent Technologies (LU)
LU 2.370-2.5%3:59 PM EST
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: GVTucker who wrote (14159)3/24/2000 3:44:00 PM
From: Prabhu Kavi  Read Replies (4) of 21876
 
GVTucker,

I disagree with your conclusions.

The reason that companies like Cisco acquire so much has less to do with accounting rules than with market leadership. Most of the innovation today happens in smaller startups, not in big companies. This is due to the high level of talent that startups get, and the sheer number of them virtually guarantees that some of them will create more innovative products than the established big companies.

So when a startup creates a working innovative product that a big company cannot, the big company has three choices:

1. Buy the startup, and use its extensive sales channels to gain market leadership.
2. Not buy the startup, and face the threat that your main competitors will buy it and beat you in the market.
3. Fight the innovative startup in the market, and hope that the big company's superior sales channels can win. But think of Cisco against Juniper and you see this doesn't always work.

The best recent example of when an acquisition made sense was Cerent. Here was a company with an innovative product that the established companies did not or could not produce. They had numerous customers and were ready to go public. Cisco bought Cerent for what seemed to be an outrageous price, but is now selling boatloads of them through its sales channel. In retrospect, that $6.9 billion looks well spent.

So it's simple. Big companies must acquire because they simply cannot innovate faster than all of the startups, or face loss of market share against some of these startups. Changes in accounting rules may change the price, but not the need to acquire.

Prabhu
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News