First, Hewlett-Packard confirmed plans to break into two companies (Hewlett-Packard Enterprise and HP Inc.). Then, Symantec confirmed plans to break up into separate storage and security companies. Now, some Wall Street pundits are wondering if Cisco Systems (CSCO) will go to pieces, too. My reaction? I sincerely doubt Cisco will make such a move. Here's why.
For starters, Cisco's current business does not -- in any way -- resemble the current HP and Symantec situations. Indeed, both HP and Symantec -- as currently constructed -- were built on flawed acquisitions:
- Hewlett-Packard acquired Compaq Computer in 2002. The move gave HP a big footprint in the PC and server market. But HP has had an on-again/off-again love affair with low-margin PCs over the past decade. At the same time, HP's home-grown printer business has seen better days. HP's decision to spin off a combined PC-printer business basically ends much of the HP-Compaq PC experiment, and bundles in the shrinking printer operation, too.
- Symantec acquired Veritas in 2005. At the time, then-CEO John Thompson said the deal would converge the storage and security markets into an information protection opportunity. I believed the vision. But it was either flawed or Symantec didn't execute -- or both. Now, Symantec is basically unbundling the storage business from its security offerings.
In stark contrast, Cisco is not a two-headed monster. The company was not built through an ill-advised "merger of equal" strategy. Sure, Cisco has purchased dozens of companies. But there isn't a clear line between home-grown Cisco and the acquired assets. So somehow splitting the company into two entities doesn't make sense on paper.
Cisco: Nine Tentacles, Big Reach
Still, Cisco claims to lead nine markets. In theory, the company could potentially spin off products in one or more of those market segments. Here's a look at each one, along with Cisco's claimed market share according to Cisco's corporate positioning for Q1 calendar year 2014:
- Routing (51 percent market share)
- Telepresence (44 percent):
- Wireless LAN (50 percent)
- Switching (66 percent):
- Voice (35 percent):
- Web Conferencing (41 percent)
- Blade Servers (26 percent)
- Storage Area Networks (41 percent)
- Security (32 percent)
Overall, most of those offerings fit into Cisco's unified data center vision -- servers, storage and compute tied together.
I could potentially see (2) telepresence and (6) web conferencing carved out of the business. In my mind, the telepresence glory days ended when "good enough" solutions like Skype video and Google Hangouts went mainstream. Similarly, WebEx faces free, good enough conferencing alternatives from numerous rivals. Perhaps Cisco would even be willing to spin out (9) security -- but that's an extreme long shot, considering security is front-of-mind for corporate executives and their IT teams.
Instead of spinning off or selling of businesses, I'd like to see Cisco focused on answering the biggest question of all -- who will succeed current Cisco CEO John Chambers? The answer, at least publicly, is still pending.
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