Cisco eyes Scottish shopping spree

SPECULATION is rising that Cisco Systems could be ready to hit theacquisition trail again with the news that the US networking andinternet infrastructure company is running the rule over Scottishtechnology firms.

The technology bellweather has a cash and cash equivalents pile inexcess of GBP 12bn, and is well known for its propensity for growthby acquisition.

Maggie Morrison, head of Cisco's operations in Scotland andIreland, said that members of the company's European acquisitionsteam are currently in Scotland and have been in contact with at leastone firm.

Scotland's reputation as a hotspot for the research anddevelopment of technology was well known in Cisco's San Jose HQ, sheadded.

She said: "We are still making acquisitions. If we find the righttechnology, we could acquire that in any country.

"The acquisitions team is in Scotland at present. A lot of whatthey do relies on local knowledge about what is going on in aparticular region.

"The type of company that Cisco acquires is quite small, with asmall number of staff, but with international technology. Fibreoptics might be a good example."

It is thought that any acquisitions it makes would probably be ona small scale, with a purchase along the lines of the 113m poundsdeal for Cumbernauld-based Atlantech, which was taken over in 2000.

This week, Cisco's latest financial figures provided a rareglimmer of hope for the world's beleaguered technology industry. Itsaw profits shoot up to GBP 501m in the three months to the end ofJuly from GBP 4.55m last time.

In that period, group revenues grew 11.6 per cent to GBP 3.18bn inthe first quarter period.

Morrison said that Cisco, which makes the technology that linkscompany computer networks, was forecasting modest growth of between 5per cent and 10 per cent this year in its Scottish operations.

Growth in Scotland, where Cisco has around 200 research anddevelopment staff based at sites in Leith, Bellshill and Cumbernauld,was 8 per cent last year.

Despite the modest growth, Morrison said the company was lookingfor more interest from the public sector and among small-medium sizedenterprises in the coming year.

She said: "I don't see things improving dramatically in the next12 months. The sales cycle is 12-18 months and I don't see thingschanging there.

"We have seen significant growth from people buying into convergednetworks. People are buying into the IP telephony and integratedvoice and data and video technology.

"Encouraging areas are the public sector. For example, we areseeing growth in hospitals and Scottish Criminal Records Office. Ithink that will continue."

In the wake of the recent global slowdown, Cisco, like manytechnology firms, has struggled as spending on products has fallen.

The company made headlines for the wrong reasons earlier this yearwhen it announced plans to axe more than 8,000 jobs worldwide.

Morrison said she was hopeful that the company's UK operations,which are headed by Duncan Mitchell, had seen the last of cuts.

She said: "We did have to lay people off as a group - 8,000worldwide. We are hoping that we have done it once, and that will beit for Cisco."

The firm's Scottish operations certainly appears to be a fairlyhappy ship, with just one person resigning from the company since1997.

Morrison said the company had been forced to explore new ways ofworking to retain staff as Cisco's shares have fallen and theindustry has struggled. Shares in Cisco are down 86 per cent fromtheir peak.

She said: "Until the downturn, everybody had shares and the shareswere going up. What we have had to do is concentrate on people andcareer development.

"I think that we will come though this stronger.

"When things do pick up, I think they will remember that Cisco isa good place to work."

In addition, the company is still hopeful of relocating its threeScottish operations into one space, probably in Glasgow. Plans had tobe put on hold recently until the sector picks up.

Cisco's European acquisitions team visits Scotland four times ayear to keep posted on technology companies north of the Border.Cisco, which briefly became the world's largest company, has achievedmuch of its growth through acquisitions, buying 78 companies sinceits inception in 1984. In 2000, the company bought 23 firms alone.

In 1999, Cisco paid $6.9bn for Cerent Corporation. Other purchasesinclude the 2.5bn dollars acquisition of Italy's Pirelli OpticalSystems and Monterey Networks, which was picked up for $500m.

gdixon@scotlandonsunday.com