The purchase of one company by another has long been a common enough event in the world of big business. Indeed,
during periods of economic stress and stock market slow downs there are numerous opportunities for large, relatively cash rich organisations to snap up their smaller brethren. Today comes news that the Mighty Cisco has reached agreement to acquire Andiamo Systems, Inc., a developer of storage switching technology.
Andiamo, which is Italian for "Let's Go", was founded in January 2001 and has concentrated on the Storage Area Networking (SAN) market and has developed a range of intelligent switching products for this high growth sector. The demand for storage capacity is growing very rapidly despite the poor economic climate and SANs are accounting for an ever-higher percentage of storage being deployed. It is expected that Cisco will begin selling Andiamo switches in the guise of the Cisco MDS 9000 Family before the end of the year.
Andiamo's products boast of support for several protocols, including Fibre Channel, iSCSI and FCIP whilst the software services highlight traffic management capabilities, security and integrated diagnostics.
It is interesting to note that it is difficult to evaluate just how much the acquisition will cost Cisco, especially as Cisco stock will be swapped for all outstanding shares in Andiamo. The final price paid will be based on a number of factors including the sales of Andiamo products by Cisco in the three months before the sale closes and a multiplier based on Cisco's sales and market capitalisation at that time. With the sale due to close between February and April 2004, Cisco admits that the net purchase price paid will be somewhere between "$ 0 to approximately $ 2.5 billion".
It is clear that this is a significant move by Cisco that is certain to shake up the incumbent storage vendors. With Andiamo already producing director-class and fabric multi-protocol switches, organisations such as Brocade, McData, QLogic, Vixel and the rest may soon find that they have a giant knocking on their door. Indeed, John Chambers, CEO and president of Cisco, has stated that "This acquisition supports Cisco's strategy to enter into new growth markets, such as storage networking, where we believe we have the potential to be the number one or two player."
The addition of these products to Cisco's existing storage networking products significantly enhances the company's potential to extend its customer base in the storage market. To achieve this, the company needs to acquire specialist storage skills and must work closely with software and service providers. However, as storage networking continues to mature, as latent network capacities grow and communications costs drop, Cisco is well positioned to cultivate over time a viable, profitable customer base for its storage offerings.
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