Cisco has developed a four-step plan to assure successful acquisitions. Of course, there is risk to any business move. In spite of their careful plans, an acquired company could turn out to be unprofitable; however, most of Cisco's financial problems did not come from their acquisitions, but rather from missing a change in technology.
Discuss Cisco's approach to managing their business: employee focus, diversification of business, flexibility of company design: Cisco seems to value the employees of a newly acquired company, following their "Mario rule" which states that any employee of a newly acquired company can be terminated only if both Chambers and the former CEO of the acquisition give their consent. They believe if they don't retain executive management, they don't retain the rank and file. They have built a culture that accepts people from different environments and backgrounds because they focus on intellectual capacity. Chambers believes that they acquire the next generation of products through the people of the company they acquire.
According to an article in USA today (January 24, 2004), the fall of Cisco began in 2001 when dozens of telecom and Internet service providers" business crashed and they stopped buying Cisco equipment. Cisco was caught with warehouses of inventory, too many product lines and too many employees. Chambers was caught off guard and the business went from 70% growth to minus 30% growth in 45 days. I feel that diversification of product lines before this might have prevented this fall. The article stated that there had been warning signs that were all but ignored by Cisco's top management.
However, due to the systems that were already in place, Chambers was able to stop the free-fall. It was not easy for him to do this, as "layoffs churn at him". However, he took swift action, laying off thousands of employees, putting a stop to free spending, and moving the company towards cross-division teamwork.
