Cisco acquires Linksys

Cisco Systems is planning to capitalise on the expansion of broadband internet services and move more heavily into the small office/home office (SOHO) market with the acquisition of The Linksys Group.

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By  Zoe Moleshead Published  April 29, 2003

Cisco Systems is planning to capitalise on the expansion of broadband internet services and move more heavily into the small office/home office (SOHO) market with the acquisition of The Linksys Group.

The deal, which will see Cisco issue common stock with an aggregate value of US$500 million in exchange for Linksys’ business and outstanding employee stock options, should be finalised by July this year and will enable the networking giant to deliver accessible products into the fast-growing SOHO market.

“By entering this market with a solid product line and distribution leadership, we believe Cisco will be strongly positioned in this emerging high-growth market. In addition, the unique combination of Cisco’s networking expertise and Linksys’ consumer leadership — and its easy-to-use products — will enable consumers to benefit from new functionality for an even easier, feature-rich home networking experience,” comments John Mason, vice president, commercial marketing, Europe, Middle East & Africa.

With Linksys already a well-established name in the SOHO and consumer space sector, Cisco is keen to take advantage of this and, as such, will allow Linksys to function as an independent division and retain its brand name. “We intend to maintain the Linksys brand and then over time associate the Cisco brand with Linksys so it is clear that Linksys products are from Cisco,” says Mason.

Gartner Group also suggests that the Linksys acquisition is more about brand name and market share than previous Cisco deals, which have generally seen companies bought, assimilated and Cisco-branded fairly quickly. However, the analyst house does believe that there are certain synergies between the two vendors.

“The two companies’ products and market are complementary. Cisco sells feature-rich, high-margin products to midsize and large enterprises that require service and support. Linksys provides affordable products to cost-sensitive buyers requiring modest service and support,” says a report by Rachna Ahlawat and Andy Rolfe of Gartner Group.

Although Cisco has yet to outline detailed plans for a regional go to market strategy, Mason says that once the deal is complete later this year, things will become clearer. Additionally, the existing availability of Linksys products in the local market means there is less of a need for Cisco to drum up awareness to the products.

“Linksys products are already available from a number of distributors in the Middle East,” says Mason. “[But] it’s not really a question of territory, more a question of marketing to a segment, which Cisco has not traditionally targeted. [However,] we have a high level of strategic partnerships with service providers who have the expertise to help us accelerate sales into new markets,” he continues.

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