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To: djane who wrote (46178)	5/7/1998 3:56:00 AM
From: djane	Read Replies (1) \| Respond to of 61433

Forbes article. Looking for the next Cisco By Om Malik Lucent Technologies' (LU) decision to acquire Landover, Md.-based Yurie Systems (YURI), a small but fast-growing manufacturer of devices that make it easier to send data and video over the Internet, for $1 billion in cash, has a simple message--a networking startup can all but forget about becoming the next Cisco Systems (CSCO). The billion-dollar deal is the latest among the scores of deals that have seen many a promising networking startup acquired by the giants of the networking and telecommunications hardware industry. Every networking startup with maverick technology is an acquisition target. The notable buyouts this year include Cabletron Systems' (CS) acquisition of Gigabit Ethernet startup Yago Systems for over $210 million, and Bay Networks' (BAY) $156 million purchase of Acton, Mass.-based New Oak Communications in January this year. Cisco has been on a buying binge of its own. In the month of March alone, the company bought Austin, Tex.-based NetSpeed for $216 million and Palo Alto, Calif.-based networking software maker, Precept Software, for $84 million in stock. However, everything pales beside the $35-a-share cash offer Lucent made for Yurie. If the purchase of Yurie is any indication, then every networking startup with maverick technology is an acquisition target. Jeong Kim, Yurie's chairman and chief executive, started the company in 1992; it went public in the winter of 1997. At the end of the first quarter, the company had 250 employees. Last year, Yurie earned $6 million on revenues of $51 million. Analysts estimated that Yurie would have earned $100 million in 1998. The fact that Lucent paid 20 times 1997 sales, or 10 times 1998 sales, for Yurie makes it clear that a networking startup does not need to have major revenues to become an acquisition target, analysts say. "What these big companies (like Cisco) are looking for is cutting-edge technology and engineering talent which can help them introduce cutting-edge products faster than their rivals," says Gregory Rossmann, a principal at Broadview Associates, a Fort Lee, N.J.-based investment banking firm that specializes in mergers and acquisitions. Rossmann says for a giant like Cisco buying a startup is like outsourcing its research and development. Not only does it buy good technology, it also buys the intellectual capital that goes with that technology, which makes buying startups even more worth its while, Rossmann adds. He points out that a hot startup, after the initial phase of rapid growth, has to deal with sustaining double-digit sales growth--a situation which is difficult if you are a small company with a handful of products. On the auction block \| top \| Forbes Front Page \| Forbes Magazine \| The Toolbox Sitemap \| Help \| Search \| Webmaster c 1998 Forbes Inc. Terms, Conditions and Notices