Cisco Summa Four

Screening Criteria Means of achieving criteria Evaluation

Offer both short term and long term win-wins for Cisco and the acquired company

Have a complementary technology that fills in a Cisco’score product space

Have a technology that can be delivered throughCisco’s existing distribution channels

Have a technology and products which can besupported by Cisco’s support organization.

Is able to leverage Cisco’s existing infrastructure andresource base to increase its overall value

Share a common vision and chemistry with Cisco

Have a similar understanding and vision of the market

Have a similar culture

Have a similar risk taking style

Be located ( preferably) in Silicon Valley or near one of Cisco’s remote sites

Have a company HQs and most facilities close to oneCisco’s main sites

Page 3 Cisco Systems, Inc: Acquisition Integration for Manufacturing

Have a complementary technology that fills in a need in Cisco’s core product space

•Business strategy : To provide one-stop shop for end-to-end networking solutions .

• Challenge : Product categories included High-End Routers, WAN switches and networkmanagement systems. Product portfolio didn’t consist of switching platforms or valueadded telephony services.

• Deregulation of the telecommunications industry : Shift from proprietary switches tostandards based open programmable switches -> less time to market and reduction indevelopment costs.

• Development of a next generation product(Project Alpha) – Industry’s first standardsbased programmable switch : Helps in achieving the end-to end networking solutionsprovider.

Summa Four : Extending the product portfolio ?


Have a technology that can be delivered through Cisco’s existing distribution channels

Major buyers were telecommunication service providers ( like AT&T, MCI, Sprint, BT) forboth the companies, hence the same distribution partners and VARs can be leveraged.

Have a technology and products which can be supported by Cisco’s support organization.

Is able to leverage Cisco’s existing infrastructure and resource base to increase its overall value

Summa Four’s technology of value added telephony applications was completely newas compared to Cisco’s existing knowledge base. Moreover, its MRP system was notcompatible with Cisco’s MRP system. Its home gown test system was far less automatedthan Cisco’s Autotest system.

If certain products like VCO/4K turned out to be profitable , then Cisco’s additionalcapacity and testing infrastructure can be used to produce more of the product.


Have a similar culture

Have a similar understanding and vision of the market

Have a similar risk taking style

Have a company HQs and most facilities close to one Cisco’s main sites

Summa Four was a small firm playing in the niche market and concentrated on oneproduct category only. Cisco had an impressive product line and acquisition was theway to gain access to new technologies.

Cisco being a big organization had complex processes. Summa Four had built thebusiness in a simple fashion where personal connections and informal processesallowed for quick action.

Although nothing specifically mentioned, Cisco’s huge product portfolio would enable itto take more risks than a smaller firm like Summa Four

Summa Four’s HQ and manufacturing facility were located in Manchester which wasone hour away from Cisco’s R&D facilities.


A PRIORI DUE

DILIGENCE

MANUFACTURING INTEGRATION

TEAM

MANDATORY INTEGRATION STEPS

SITUATION SPECIFIC INTEGRATION STEPS

Cross functional team from Cisco

Review company’s manufacturing processes

Identify risks

Provide input to valuation discussions

Senior manager within acquired company appointed as the integration team leader

Integration team comprising of experienced members from Cisco and acquired company

“Buddy System”

Merging information systems:MRP and Autotest

Aligning current processes:Evaluating suppliers, assessing outsourcing options, determining product lifecycles

Implementing ongoing methodologies:Defect reductions, forecasting, new product introductions

Manufacturing facility decisions

Employee Integration issues


A priori due diligence of the company’s manufacturing facilities ensures that Cisco is acquiring a company that will better its prospects and not lower Cisco’s profitability

By appointing the senior manager of the acquired company as the integration team leader, the employees there were comfortable and secure- felt that since someone trusted was leading the integration efforts- so nothing would go wrong. Buddy system ensured that new employees learnt by watching and interacting with Cisco people within their company

Integrating information systems into Cisco’s MRP and Autoset platforms to reduce complexity and hassle of maintaining multiple systems due to large number of acquisitions

Evaluating suppliers important to ensure quality and reliability of vendors- maintain credible brand image of Cisco

Since decisions about retaining or shutting down manufacturing facilities and employee integration issues are highly sensitive, evaluating them separately for every acquisition on a case by case basis ensures better transition


Merging information systems

• Summa Four used a home-grown, PC based test system that was far less automated than Cisco’s Autoset system

• Summa Four’s MRP system was from Symix whose software was incompatible with Cisco’s MRP system

Evaluating suppliers

• Summa Four purchased large number of individual parts (~5000) from 250 suppliers

• 85 suppliers were completely new to Cisco- Supply Ops group will take time to evaluate and approve

• 200 of Summa Four’s parts were sole sourced- only one vendor- created pricing and continuity of supply risk


Employee Integration

• Summa Four and Cisco were different in terms of scale-210 employees in Summa Four versus over 10,000 employees in Cisco

• Summa Four had a simple functional organization, personal connections and informal processes. Cisco had far more complex processes.

• Summa Four employees worried about the level of influence they would be able to exert in Cisco

• Unclear about what role the Summa Four products would play in Cisco

• Cultural implication and feeling of ‘being just one of many in the long line of Cisco acquisitions’


THANK YOU!!!

Cisco Summa Four

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