Crescendo Corps Soars at Cisco
When Cisco Systems Inc. (Nasdaq: CSCO) bought its first company, Crescendo Communications, in 1993, the networking equipment giant paid for a new product and ended up with many of its future leaders.
Crescendo's products allowed enterprises to build high-speed local area networks (LANs), with data running at 125 Mbit/s over existing telephone wires. Cisco paid about $89 million for the startup then, a premium of about 17 times Crescendo's yearly revenues. Even that, though, would pale in comparison to what Cisco would pay for other startups in a frothier market.
And, interestingly, the later, higher-fliers came and went while many of Crescendo's brass are still, more or less, selling switches. To wit, how many senior Monterey Networks executives do you see in Cisco's management ranks?
"I guess a lot of the startup executives that came to Cisco later just took their money and left," muses one Cisco executive.
Cisco's PR machine, surprisingly enough, gives Cisco the credit for the Crescendo crew's tenure. "High-performing people such as the ex-Crescendo executives have chosen to stay with Cisco because they believe in the company and its products," says Laura Johnston, a Cisco spokeswoman ("I do believe in switches! I do believe in switches! I do, I do, I do...").
Interestingly, Crescendo's business evolved into Cisco's Catalyst switching business, and the deal, though expensive, paid for itself over time. What's more, several of its managers are still running big business groups inside of Cisco today. Here's a partial list:
- Luca Cafiero, a Crescendo founder, is now senior VP and general manager of Cisco's switching, voice, and storage unit -- the group that acquired Andiamo Systems Inc. (see Cisco Buys Andiamo).
- Buck Gee, Crescendo's product marketing manager, is now CEO of Andiamo, a storage networking startup and Cisco employee retention vehicle (see Cisco's Creative Andiamo Options).
- Prem Jain, who was once Crescendo's VP of engineering, is now senior VP and general manager of Cisco's access and routing group.
- Mario Mazzola, Crescendo's founder and CEO, is now Cisco's chief development officer, in charge of Cisco's research and development strategy, as well as its engineering organization.
- Randy Pond, once Crescendo's chief financial officer, is now senior VP of Cisco's worldwide manufacturing operations and logistics.
- Jayshree Ullal, formerly Crescendo's VP of marketing, is now senior VP and general manager of Cisco's optical networking group (see Cisco's Ullal Talks Optical Future).
Through a series of other acquisitions after Crescendo, Cisco grew its enterprise switching business at what turned out to be just the right time. In its fiscal year 2002, Cisco, best known as a router vendor, recorded that its revenues from switches outpaced its router revenues by about $1.9 billion. In the prior fiscal year, the gap between the two product groups was about $1.8 billion in revenues, with switches again leading the way.
— Phil Harvey, Senior Editor, Light Reading