A Guide To Cisco's Shopping Basket

Economic downturns have always been an opportunity for the tech industry's big fish to swallow a struggling minnow or two. But when Cisco entered the recession with more than $30 billion in cash--and added another $4 billion by selling debt in February--industry watchers expected a mega-buyout, possibly one of Sun Microsystems or EMC proportions.

That didn't happen. Oracle snapped up Sun and Cisco ( CSCO - news - people )created a joint venture with EMC ( EMC - news - people ) earlier this week, quelling acquisition rumors. And instead of one massive buyout, Cisco is in the midst of a shopping marathon, acquiring smaller companies at the rate of practically one a week since the beginning of October.

Cisco isn't just bulking up. It's spreading out, jumping into areas as disparate as consumer gadgets and Web-based antivirus protection--a few of the 30 "market adjacencies" that Cisco Chief Executive John Chambers has told analysts the company plans to enter. A close read of those recent acquisitions shows how they're getting there--or, for some less promising impulse buys, how they're not.

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DVN: Earlier this week, Cisco agreed to pay $44 million for the set-top box holdings of Hong Kong-based DVN. The deal is a pint-sized version of its Scientific Atlantic buyout in 2005. The idea: By offering to sell cable providers cable television hardware from the router that carries the data to the box on top of their customers' TVs, Cisco may be able to offer faster and more efficient service.

DVN also gives Cisco a foothold in China's cable market, where 160 million cable TV viewers will be required to switch to digital television by 2015. And at only $44 million, it's a small, safe bet for the networking giant. "This is chump change for Cisco," says Yankee Group analyst Zeus Kerravala.

DVN also gives Cisco a foothold in China's cable market, where 160 million cable TV viewers will be required to switch to digital television by 2015. And at only $44 million, it's a small, safe bet for the networking giant. "This is chump change for Cisco," says Yankee Group analyst Zeus Kerravala.

Acquiring Starent could help Cisco staunch that flow of customers to its competitors. It also gains an advantage over Juniper Networks ( JNPR - news - people )--second to Cisco in the carrier market with 20% market share--which is left as the only networking company without its own mobile capabilities.

Tandberg Systems: Cisco's $3 billion bid for videoconferencing firm Tandberg is hardly a done deal. Tandberg's shareholders voted to reject Cisco's offer earlier this month, and Cisco hasn't upped its bid.

But if the Tandberg deal does go through, it would immediately put Cisco among the big leagues in videoconferencing. Despite all John Chambers' talk about telepresence, Cisco sells just 1% of all videoconferencing systems globally today, according to Technology Business Research, compared with Tandberg's 40%. Part of that larger share comes form Tandberg's focus on lower-end video products that Cisco lacks.

Tandberg technology would give Cisco a "push-pull" strategy, says Catharine Trebnick, an analyst with Avian Securities. Every sale of that expanded range of video products would "pull through" more of Cisco's networking equipment to the data center or carrier hosting the system, she says.

Pure Digital: Cisco's $580 buyout of Flip camcorder maker Pure Digital last March remains something of a head scratcher. Yes, the $230 HD cameras are a trendy new gadget, and the segment has plenty of room to grow. But the nascent ultra-cheap camcorder category may be snubbed out by devices like the video iPhone and iPod, which in some ways make the one-trick Flip obsolete. Other competitors are also matching the Flip's functions. "I'm not sure why Cisco wants to compete with Sony ( SNE - news - people ) and Kodak," says Yankee Group's Kerravala.

Cisco has told Forbes that the acquisition was at least partly aimed at gaining the software for a home telepresence system that will be compatible with televisions. But $580 million, analysts say, is a high price for some video software and a device without a future.

Tidal Software: Cisco wants to own the virtualized data center. In its Unified Computing launch last March, Cisco began pushing its own so-called California server, along with the switching capabilities to move virtualized servers around and among data centers.

A month after the Unified Computing rollout, Cisco acquired Tidal Software for $105 million. Tidal gives Cisco the software to monitor and coordinate what IT resources applications are using, a kind of command-and-control for virtualized computing. The new abilities will also come in handy for Cisco's joint venture with EMC and VMware ( VMW - news - people ) to offer prepackaged virtualization products for the data center.

The next buyout: Even after all its spending and a $13 billion stock buyback plan, Cisco will still have around $15 billion to continue its spending spree. Many of the 30 new market expansions Chambers touted at a recent analyst day still haven't been addressed, from "Routers In Space," a satellite-based Internet plan the company is mulling, or the so-called "smart grid," Cisco's ambitions to control the networking for energy utilities.