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Optical/IP

Cisco/Procket Deal Imminent

Today's the big day for news on whether Procket will be acquired, say several sources.

Two sources close to Procket Networks Inc. have told Light Reading that the company's fate will be made today. As ever, there's intrigue here because only one of the two sources would name the acquiring party -- and that source says its Cisco Systems Inc. (Nasdaq: CSCO). Foundry Networks Inc. (Nasdaq: FDRY) has also been mentioned as a suitor, but that now appears less likely -- and Cisco certainly has the deeper wallet to make the deal happen.

The deal, reportedly worth $80 million, has been expected this week since a flurry of reports detailing a potential deal dropped last week (see Cisco May Pocket Procket).

Cisco has since put forth that, while it would never buy a competing product, it doesn't mind acquiring the talent that built the competing product. "I'm not going to buy another router company for a router," Chambers told a Bear Stearns investment conference yesterday, according to reports by Reuters and The Wall Street Journal. "I could not be more comfortable with our routing strategy...

"Fifty really sharp engineers can bring a product to market quicker than 500 can, so if ever there is a talent acquisition that makes sense to me in the market, I don't hesitate," Chambers added, according the Reuters report.

However it's sliced, Cisco is about to purchase one of the routing upstarts that, if nothing else, provided a catalyst for Cisco to get its own next-generation core router, the CRS-1, built and released after several years of fits and starts (see Cisco Unveils the HFR).

While it will be interesting to see what Cisco will do with the technology, it will be more interesting to watch the marketing story unfold. Never before has a routing market leader announced its own next-generation product, then purchased a competitor solely for staffing reasons.

Calls to Cisco were not returned in time for this article.

— Phil Harvey, News Editor, Light Reading

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null0 12/5/2012 | 1:34:29 AM
re: Cisco/Procket Deal Imminent If this is true I suspect that the talent at procket will be more concerned about what happens to them.....
Belzebutt 12/5/2012 | 1:34:28 AM
re: Cisco/Procket Deal Imminent Two sources close to Procket Networks Inc. have told Light Reading

Isn't always sources "close to Procket" that come up with these rumors every time an acquisition comes up? It must be so exciting for them.
Flower 12/5/2012 | 1:34:28 AM
re: Cisco/Procket Deal Imminent Many employees at Procket have bought their stock options in advance. If Procket is sold for $80M that will not be enough to pay back all investors.

If I understood correctly, the preferred stockholders will get their money first. Out of the $285M (or more) how much did the VCs and other preferred shareholders inject ? I expect nothing will be left for the non-preferred shareholders ? So people will have worked 4 or 5 years at Procket, will not get anything out of it, and will even lose the money they have invested themselves.

Might this be the reason why Tony Li left ? Because he didn't want to be responsible for this happening to the employees he helped recruit ?

I'm curious to hear the details once they get announced.
coreghost 12/5/2012 | 1:34:27 AM
re: Cisco/Procket Deal Imminent Nobody knows what the stock pool for procket
looks like anymore. They raised a whole lot of
their money based on a valuation at the time of
over a billion dollars. Since then, they have
raised more money quietly and its been speculated
that there had to be substantial adjustments
to the ownership.

The investors are likely to get a fraction of
their investment back. I would guess that to
keep the employees happy, cisco will spread some
cisco stock or money around.

Needless to say, this will be closely watched
inside cisco by the "untalented" employees
who will get to do the b-team tasks suited
to those who didn't work at procket.

And Tony's leaving as far as any of the stories
to come out go had nothing to with stock.

networking_legend 12/5/2012 | 1:34:26 AM
re: Cisco/Procket Deal Imminent Needless to say, this will be closely watched
inside cisco by the "untalented" employees
who will get to do the b-team tasks suited
to those who didn't work at procket


It will be very interesting to see what Chambers does to sweeten the pot for the Procket employees (many of whom are ex-Cisco to begin with) in order to encourage them to stick around.

And what kind of message does this send to these "untalented" engineers, many of whom may have chosen to stay with Cisco during the bubble, rather than bail on the company, and try to make it rich with Procket, etc.
toonces_has_the_car 12/5/2012 | 1:34:26 AM
re: Cisco/Procket Deal Imminent It is not uncommon for the preferred shareholders to agree to waive the preference, in order to get the deal done. The thinking being "it is better to get a fraction back than nothing at all".

-toonces

signmeup 12/5/2012 | 1:34:25 AM
re: Cisco/Procket Deal Imminent Let's be absolutely clear - $80M for a company that took close to $300M means that NO ONE will be making money.

As far as those 'untalented' engineers back at Cisco, I would almost guarentee that they made MUCH more money between the employee stock plans, 401k matching, yearly bonuses, ect. than their fellows at Procket who endured layoffs, pay cuts, botched management, and finally being slapped around by Cisco...

gotman 12/5/2012 | 1:34:24 AM
re: Cisco/Procket Deal Imminent >>finally being slapped around by Cisco...

Slapped around? I mean what other option do they have when Procket isn't selling routers?

You make this sound like an ambush, isnG«÷t really there proactive to work at Cisco or leave and find another job? They should be thankful to Cisco if the deal falls through. Its a life line. IG«÷m sure Cisco will reward those who it sees talent in, don't you worry about that. As for those no so smart people at Cisco, well they will just be managed out. I donG«÷t think that has ever stopped. :)
signmeup 12/5/2012 | 1:34:23 AM
re: Cisco/Procket Deal Imminent Procket is selling routers - they have 2% of the market share according to gartner. And no, I am not being facetious, this actually is a compliment given the current core router market.

As I stated in an earlier post, there just isn't room for another core router vendor at this point. If this acquistion happens, it just reinforces the point. Good luck to the remaining core router startups and those VC's who have invested in them.

Since a good portion of the engineering talent originally came from Cisco, I'm sure they know how things work from the inside. The reason they left in the first place was to have the opportunity to build bigger and better than everything else. I don't think they need your advice on how to be successful inside of Cisco :)
chechaco 12/5/2012 | 1:34:22 AM
re: Cisco/Procket Deal Imminent Procket is selling routers - they have 2% of the market share according to gartner.
-------------
Of all routers being sold on a given month - perhaps. Of all installed base of Internet core routers - laughable.
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