Group 7

Theow Hee Ang | Philippe Cuendet | Andre Lehmann |Dimitrios Pliakos | Marina Viergutz

Should Cisco acquire INS?

Agenda

• Cisco’s History• Cisco’s Business Segments• Cisco’s Strategy - Opportunity• INS Overview• Cisco vs. Lucent• Acquisition vs. Strategic Alliance• Transaction Cost• Parenting Fit

Revenues: USD 40.04 BN

Net Income: USD 7.76 BN

Employees: 70,714(fiscal year 2009)

Industry:

Computer Networking

Mission Statement:

Shape the future of Internet by creating unprecedented value

and opportunity for our customers, employees,

investors, and ecosystem partners

Values:

Dedication to Customer Success

Innovation and Learning

Partnerships

TeamworkDoing More with Less

2010

History

Len Bosack & Sandy Lerner founded Cisco

CEOJohn Morgridge

Bosack & Lerner sell all of their stock for $150 MN

CEOJohn Chambers

IPO

Revenues exceed

USD 1 BN

Revenues > $12.2 BN

20,000 employees

Top 5 companies (Market Capitalization)

August 1999

Should Cisco acquire INS?

Acquisitions & Joint VenturesProfessional & Market Oriented Organisation

1999 – It’s been 11 years

Birth of the €uro Birth of napster

Dow exceeds 10,000 and 11,000 for the first time

World Population exceeds 6 BN for the

first time

Cisco’s Business Segmentation

Big Corporations

Selling equipment that directs data around big corporate networks

Small and Medium Businesses

Cisco aims to be the leader in the gear for small businesses

Internet Service Providers

80% of the internet’s routers come from Cisco

Telephone Companies

Data and Telephone networks convergence.

40%

60%

- Market Size: $16.5 BN- Cisco’s SOM: 40%- # 1 in this market

18%82%

- Market Size: $13.6 BN- Cisco’s SOM: 18%- High competition

33%67%

- Market Size: $9 BN- Cisco’s SOM: 33%- # 1 in this market

1%

99%

- Market Size: $225 BN- Cisco’s SOM: 1%

- New entrant

Industry Segmentation

6% 5%3%

85%

Telephone Companies

Cisco’s great opportunity! Net-based technology = Innovation

Internet Service Providers

80% of the Internet’s routers come from Cisco

Small and Medium Businesses

Expected Cisco’s Growth Rate: +30%(growth of $0.7-1 BN per year)

Big Corporations

Expected Cisco’s Growth Rate: +35%(growth of $2.0-2.5 BN per year)

Cisco’s Strategy: What Industry – Business Segment?

1% 2% 3% 4% 5% 6%0

2

4

6

8

10

12

14

16

2.55

7.510

12.515

Cisco's Revenues in $ BN from the Telephone Companies’ Segment

(2000)SOM

2000 2001 2002 2003 20040%

10%20%30%40%50%60%70%80%90%

100%

20%

40%

60%80%

100%

Cisco's Revenues Growth (%) from the Telephone Companies’ Segment

(2001) SOM

(2002) SOM

(2003) SOM

(2004) SOM

(1999)SOM

If Cisco gains 1% percent Share of Market (SOM) in the Telephone Companies’ Segment every year, then by 2004 the company would have doubled its revenues

SOM: 1% (1999) vs. 6% (2004) - Revenues: $12.5 BN (1999) vs. $25 BN (2004)

Revenues: USD 300 MN

Net Income: USD 31 MN

Employees: 2,000

Industry:

Network Consulting Services

“the knowledge behind the network”

Cisco:

8.1% share of INS’s ownership

1998: The 2 companies entered into a

multi-year agreement

INS Focus: Phone Companies

Employees: 2,000

Engineers: 1,200

Cisco Certified > 200

1999

Cisco vs. Lucent

Revenues: USD 12.20 BN

Employees: 21,000

Revenue Margin: 65%(fiscal year 1999)

Revenues: USD 38.30 BN

Employees: 153,000

Revenue Margin: 49%(fiscal year 1999)

Why?

For every $1 spent on network Equipment, $2.5 is spent on Network Systems & Support

Acquisition vs. Strategic Alliance

Cisco: Horizontal Corporate Structure Lucent: Vertical Integration

Phone Companies prefer Vertical Integration: RELIABILITY & CUSTOMER SERVICE

Develop internal KNOW-HOWProtect the KNOWLEDGE created so far

Protect and enhance Cisco's Intellectual Capital = Key driver to the Phone Industry

Cisco needs to rethink its Business Strategy: VERTICAL INTEGRATION = ACQUISITION

Transaction Cost

Good Relationship – Long-term Partnership

INS’s Management Team will be integrated after the acquisition

Cisco’s IS platform grants new employees direct access to key information and service

+

+

Efficient Knowledge TransferEfficient Integration of INS

Parenting Fit

Linkages - Complementarity Special Expertise

Good Corporate Parents add value to the businesses they own.

Parenting Opportunities between Cisco & INS

INS will get access to Cisco’s broad Client Base

INS will synchronize its network solutions with the router infrastructure

sold by Cisco

Should Cisco acquire INS?

YES!

Q&AsGroup 7

Theow Hee Ang | Philippe Cuendet | Andre Lehmann |Dimitrios Pliakos | Marina Viergutz