Volpi: In a relative sense, right now, [acquisitions] are a little less important because the principle of Cisco acquiring companies was for us to get into new market segments. Underlying that is an assumption that you know what new segments you want to get into. In the environment we live in right now, it's very difficult to identify growth markets. There are very few (see Cisco Chills on Acquisitions).
The ones that are out there – we've done some acquisitions around. For example, in storage networking, where there is some growth, we acquired Andiamo. Admittedly it's a hybrid (see Cisco's Creative Andiamo Options). We built it ourselves and it was a form of an acquisition…
Light Reading: Well, it was a transaction, anyway…
Volpi: When you cannot pinpoint your growth markets, you can't use the tool – the M&A tool. We've never thought of using the M&A tool as a consolidation vehicle. It's more of a diversification vehicle. Light Reading: What do you mean by "consolidation vehicle"?
Volpi: Buying companies that look or feel like us to gain market share or customer footprint. Acquiring a Lucent Technologies Inc. or a Nortel Networks Corp. would be consolidation of the industry.
Volpi: Well, we've had our share of issues. It's not like we're perfect. But I think when you go down to the core of it, acquisitions work based on two key factors: First it has to make sense strategically. Second, the combined companies have to operationally come together.
The people have to stay, they have to be productive. The sales people have to be able to sell the products – all those kinds of operational things.
More often than not, in our industry, people make smart strategic decisions and bad operational decisions when they acquire. Unless both factors come together, M&A doesn't work very well. In a simple way, we've always tried to pay attention to both factors.
Light Reading: What do you look for operationally?
Volpi: Operational concerns include the obvious financial metrics, stock vesting and things like that. Also, you have to ask what role the executives will play. How committed are they? Are they just selling us a business or do they really want to be a part of this company?
Light Reading: What do you think of Juniper Networks Inc.'s Unisphere acquisition?
Volpi:Undoubtedly, strategically it’s a great acquisition. It's a very good fit and there's some degree of overlap, but it’s manageable. Operationally, we'll see. There's some strong personalities at both companies and they have attempted a somewhat difficult true merger-type scenario, where a lot of the sales management derives from Unisphere and more of the engineering side comes from Juniper.
And they'll have to make some key decisions about their software strategy. Their public positioning has been JUNOS, JUNOS, JUNOS! Now they have JUNOS and UNOS or whatever they call the Unisphere thing. I think the jury's still out.