Cisco 10-Q Tells of Four Possible Deals
Scott Moritz
03/11/02 - 06:51 PM EST
Looks like
Cisco (CSCO) is putting some of its $22 billion in cash to work.
The big maker of gear for computer networks said in its latest quarterly report Monday that it has agreed to invest in four development-stage companies, and that it has taken options to buy the companies out should they reach certain financial targets. Cisco said it could pay up to $500 million in stock to buy out three of the companies and up to $2.5 billion in stock to buy the fourth.
Cisco did not name the companies or the business they specialize in. Cisco said it has funded a total of $80 million of its $142 million commitment to these four companies to date.
This is the first such disclosure by Cisco, which has come under scrutiny for its role as both venture capitalist and occasionally acquirer or customer of developing companies. The investments also signal that Cisco is not content to sit idly by as the networking industry grapples with a collapse of demand for gear from telecom companies of all sizes.
But not all industry observers are quick to call this a thaw of the mergers and acquisition market. While the recent acquisition of optical gearmaker ONI by Ciena may have been a significant tie-up in a deal shy industry, it's not likely to open the merger floodgates, say industry observers.
Nonetheless, the rumor mill is in full swing. The speculation has included possible deals between smaller networking names such as
Sonus and
Ciena; Cisco didn't offer any comment in the regulatory report about any other acquisition plans it might have. The stock, which has dropped sharply in the last two years after a long run as among the market's best performers, slid 38 cents Monday to $17.42.
Cisco's report also offered further detail on the company's accounting practices, as well as its financial condition. Accounts receivable fell 22% over the last half of fiscal 2002 and inventories declined 39%, the company said. Net cash rose $2.5 billion to $21 billion, the company said.
