When it comes to Cisco Systems Inc and dealmaking, the prevailing sentiment in Silicon Valley is: You can't predict what Cisco will buy next, but you can see why it fits.
The world's largest maker of corporate networking gear is known for its voracious dealmaking appetite, buying dozens of companies every year and digesting them quickly and efficiently to broaden its already wide-ranging business.
Cisco has led the tech industry's charge out of the recession-induced lull in mergers and acquisitions, announcing two big deals in two weeks: wireless equipment maker Starent Networks for $2.9 billion and Norwegian video conferencing maker Tandberg for $3 billion.
Analysts expect the San Jose, California-based company, which ended the last quarter with a cash balance of $34 billion, to keep up the dealmaking pace, especially now that some stability has returned to financial markets.
The ability to expand in markets where we have been strong clearly has been a big part of what we've done in the past, Hilton Romanski, Cisco's vice president of corporate development, said in an interview on Tuesday.
But the other major element is new market entry, said Romanski, a former JPMorgan banker who joined Cisco in 2000 and runs its global acquisition and venture investment strategy.
Cisco, which was founded in 1984, has spent about $56 billion on 174 deals so far, according to Thomson Reuters data. Along with its in-house team, Cisco occasionally uses a range of outside financial advisers, from Barclays PLC to Lazard Ltd.
Many of the acquisitions were start-ups or private companies with assets that bolster Cisco's core business of making switches and routers that direct computer traffic.
But as the networking business has matured, Cisco has forayed into several new interconnected markets, such as Web-based video conferencing and online video.
Cisco's business development team is a bustling hive of about 110 former investment bankers, strategists, engineers, venture capitalists and integration specialists.
The team frequently uses a virtual room, bedecked with Cisco's Telepresence and WebEx online videoconferencing systems, to toss around big ideas and hatch plans.
Comprehensive was the word one person familiar with Cisco's strategy said when asked to describe its dealmaking process. They do everything 20 times more thoroughly than everyone else. It's a pretty intense culture.
Cisco has traditionally eschewed hostile approaches or big deals, but bankers say that could change as the rivalry with other tech behemoths like International Business Machines Corp and Hewlett-Packard Co heats up.
Cisco is addicted to growth, said one banker who has worked on deals with the company before. That could push them to make a big acquisition.
The top U.S. network equipment maker has only acquired 14 public companies so far, but Romanski said they will be more active in that space.
Cisco likes to push into big markets that are in transition and hasten the pace of adoption of new technologies by buying small companies that are market leaders and using its heft to build scale, Romanski said.
To the casual observer, Cisco's $590 million purchase of Flip camcorder maker Pure Digital Technologies earlier this year can seem at odds with its 2006 purchase of set-top box manufacturer Scientific Atlanta for $5.3 billion.
But for Romanski, the goals are clear and the dots are connected.
Cisco sees corporations, individual users and the telecom companies that provide Internet, mobile and other data services to them as interlinked. What's common to all of them is the network, he said, referring to the plumbing that connects devices together and transmits data between them.
The more intelligence we can provide on how to make the network more useful ..., the better experience you're going to have and the more valuable our solutions will be to all those groups.
(Reporting by Anupreeta Das; Editing by Tiffany Wu and Richard Chang)