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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 82.62

+2.4%

2:45 PM EST

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To: TigerPaw who wrote (18176)	10/14/1998 12:19:00 PM
From: JRH	Read Replies (1) of 77400

I know that R&D expense is worth avoiding but aquisitions can often result in much of the best staff from the aquired company leaving. If one of the aquired products has trouble and the expertise is not there to solve it it makes the whole company look bad. To my mind each new purchase is a gamble, and the odds are that some of these will backfire. Cisco historically has a high retention rate for the employees of acquired companies. I don't know where I can find the stats, but I remember reading them somewhere. Also, you have to realize that the reason why Cisco buys companies is because they wait to see what technology is evolving for the mainstream, then they buy companies who are experts in that field, such as Selsius. If they wait to see what technology is evolving and then start spending money researching it, they are leaps and bounds behind these start-ups. If they try to predict where the market is going and begin developing the products early, they could be in a similar situation that companies like DEC and IBM where in in the 1980's during the PC revolution. The only major drawback that I see is that they are forced to pay a premium for these companies. Is it worth it? I don't know, ask Mr. Chambers. I have faith in him and his decisions!! BTW, I heard that CSCO was developing their own PBX switch. I don't know why they would buy a company when they were developing it themselves, but maybe they just wanted to catch up or maybe their development was having problems, I don't know.... JRH

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