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Optical/IP

Cisco Buys BCN Systems

Cisco Systems Inc. (Nasdaq: CSCO) announced late Thursday that it is buying routing software startup BCN Systems Inc., the company it backed to develop next-generation routing software (see Cisco to Acquire BCN). It's not clear that BCN had any other corporate or venture capital investors.

BCN has been actively recruiting top routing talent from Juniper Networks Inc. (Nasdaq: JNPR) and other firms, according to sources familiar with the company (see BCN Joins Router Race). Cisco says it is paying $34 million for the part of BCN that it doesn't already own and that the price tag could climb to as much as $122 million if BCN meets certain goals.

BCN Systems is a provider of networking software design that has developed a unique networking software architecture for routing applications, Cisco says in a statement.

The company's interest in BCN was first disclosed in Cisco's September filings with the Securities and Exchange Commission (SEC).

BCN was founded in April 2004 and has 45 employees. It is led by founder and CEO Michael Beesley, a systems software expert who worked on mid-range routers at Cisco, contributing to products such as the 7200. He then moved to Juniper, where he was part of the team building the flagship M40 and also helped out on the high-end T640.

The startup's formation and acquisition is Cisco's third move of late to secure highly sought routing expertise. Recently the company converted routing software expert Tony Li from feared competitor to salaried employee (see Tony Li Returns to Cisco). And, earlier this year, Cisco moved beyond its tradition of not acquiring direct competitors when it nabbed the assets and employees of Procket Networks, the company Li founded (see Cisco to Pay $89M for Procket Assets).

— Phil Harvey, News Editor, Light Reading

green 12/5/2012 | 12:59:48 AM
re: Cisco Buys BCN Systems hi,

how much did rank & file employees at BCN make out of this acquisition ?

let says bcn team meets all it milestones and is bought for $122 million over the 37 million invested in april.

vc (cisco itself) takes 90 % = 110 million
management (ceo, vp, directors)
take 60% of remaining 10% = 7.2 million
rank & file get = 4.8 million

counting about 25-30 rank & file engineers that would yields 160k per engineer. sweet deal for 6 month work !!!

at the other end let's say bcn team doesn't meet any of its milestones (unlikely) and purchase price over invested money is $35 million. doing the same calculation yields 40k per employees. still a pretty good deal for 6 month work.

how close is my back of envelope calculation ?
green 12/5/2012 | 12:59:46 AM
re: Cisco Buys BCN Systems yeah you are right. I didn't read the part about "the part that cisco doesn't already own".

the percentages are not outrageous. that has been my experience with prior startups. rank and file own less than 4 % of company.

at 460K per rank and file employee that is like winning a lottery for little or no risk in such a short amount of time.

and if they meet all their milestones that is 1.6 million per rank and file. wow !!!!
Stevery 12/5/2012 | 12:59:46 AM
re: Cisco Buys BCN Systems If the article is correct, your back of the envelope calc is not even close:

Cisco says it is paying $34 million for the part of BCN that it doesn't already own

Then, using your percentages (which assumes an unethically greedy management for this deal) for the worst case ($35M):

management = $20M
rank and file = $15M

if 20-30 rank and file, then 460K per person, and that's in the low case.

Stevery 12/5/2012 | 12:59:39 AM
re: Cisco Buys BCN Systems the percentages are not outrageous. that has been my experience with prior startups. rank and file own less than 4 % of company

For a spin-in deal, it should be quite different.
opt-out 12/5/2012 | 12:59:39 AM
re: Cisco Buys BCN Systems Good show guys! The real question is how long Cisco was able to get these guys signed on for. If they are signed up long enough to deliver a product, Juniper could be in for some real trouble. If not, Cisco clearly does not have the talent on board to deliver when these guys leave. The full $122M is likely the carrot that gets them to stay until their OS hits the field.
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