Why Cisco Has Showered These Three Men With Billions Of Dollars Business Insider 1 hr ago Julie Bort Business Insider Ciscos legendary engineering triumvirate MarioPremLuca There are three legendary engineers at Cisco known as the heart, soul and brains of the company: Mario Mazzola, Prem Jain and Luca Cafiero. Over the past 20 years, Cisco CEO John Chambers has funneled $2.38 billion to them and their teams, even though, for much of their careers, they have technically not worked at Cisco at all. High School Online aiuhs.org Its a highly unusual way to retain top talent, something known as a spin-in. A spin-in is a form of R&D in which a company is the sole investor in a startup. It sends a team of employees off to build an experimental product and then buys that startup for a predetermined and very healthy price. Cisco has spent on average $763 million to acquire each spin-in that these three men have founded, even though Cisco was also the sole investor in each. How odd is this setup? Imagine if Apple sent its stars like Jony Ive, Jeff Williams, Craig Federighi, and Eddy Cue off to an Apple-funded startup every time it wanted to build a new product like a music player, smartphone or smartwatch, and then paid them three-quarters of a billion dollars to own the product when it was done. Sounds ridiculous, right? Its the job of these guys to create new products for the Apple. Not so for Cisco. Chambers has been pouring cash on these guys for more than two decades, since Ciscos very first acquisition back in 1993, before he was even CEO. But heres the startling thing: By all accounts, the people we interviewed say the strange setup has been as good for Cisco as it has for these men. Our sources included two former Cisco execs, a network industry expert, Wall Street analysts and public documents about the transactions. Unprecedented Opus One Joel Snyder, senior partner Opus One To see what we mean, search for the words spin in on Google. Ghead. Well wait. Chances are the articles that popped up were all about Cisco and a company called Insieme Networks that Cisco funded (spending $135 million on that), then immediately bought the day it demonstrated a product (another $863 million). From startup to sale took 21 months, Chambers recently said, and cost Cisco nearly $1 billion. Insieme created Ciscos next-generation networking product, now called the Nexus 9000. It gives the company game in a new market called software-defined networking that changes how computer networks are built. SDN threatens to disrupt Ciscos $21 billion router/switch business and without a SDN product, Cisco could be toast. Its unusual that a company would hand off such an important product to a startup, but not at Cisco. This is the third such spin-in done with the same three core engineers, each of which has cost Cisco hundreds of millions dollars. And its actually the fourth company that Cisco has bought from these men. Its not just unusual, its unprecedented. The whole idea of th spin-in is unprecedented and to do it three times with the same guys – , says Joel Snyder, co-founder of Opus One, a company that helps enterprises build corporate networks. (Snyder is also a product reviewer for Network World and so well respected in the field that he was the only person Cisco invited to do a hands-on test of the Insieme product shortly after it was announced.) On Ciscos campus in San Jose, these three engineers are downright worshiped. They are universally called nice guys by every source we spoke to. They even have their own super-couple-like name and acronym: they are known as MarioPremLuca spoken as one word. When adding in Soni Jiandani, an engineer who handles marketing and has been with MarioPremLuca since their first spin-in, the team is known affectionately as MPLS, writes Cisco senior director Shashi Kiran. Thats a cute a play on words. MPLS is a popular technology for building high-performance networks that Cisco helped invent. Mario is the soul. Luca is the brain. Prem is the heart. And Sonja is the mouth, described one of the former Cisco execs who worked with the team. The other former exec said, MarioPremLuca have a lot of following and respect throughout the company. They’ve delivered multiple times. They attract the best talent. These are real visionaries and technical leaders. Theyve defined new product categories and make things happen that mere mortals wouldnt think to do. Cisco Soni Jiandani They Are Cisco MarioPremLuca are responsible for every breakout product Cisco has ever had. These guys ARE Cisco. Even Ciscos famed acquisition strategy can be traced back to them. Their company Crescendo Communications was Ciscos very first purchase back in 1993 for a stock deal valued at $94.5 million when it was announced. Wall Street was shocked by the acquisition at the time and the stock took a nose dive. Cisco CEO John Chambers recently said he paid $92 million for it. It was also Chamberss first acquisition at the company, before he was CEO – he was senior vice president running sales and operations. (Chambers has loved acquisitions ever since, averaging about 10 a year, as we previously reported.) Crescendo made something called a network switch, a new piece of hardware to build high-speed networks. It was threatening Ciscos core business at the time, which was a piece of equipment called the router. Crescendo evolved into Ciscos Catalyst 6000/6500 business (known in the industry as the Cat6). It became one of the most successful networking products sold on earth describes Snyder. AP Cisco CEO John Chambers in 2000 When Cisco bought Crescendo, it acquired another engineer, Jayshree Ullal in the deal. Ullal led Crescendos marketing and stayed with Cisco for 15 years, eventually named senior vice president of data center & switching, reporting to John Chambers. Chambers just talked about that first acquisition at the Fortune Brainstorm conference in July. In 1993, we made our first acquisition ... and the stock went down, he said. I paid about $92 million on a company with a couple million in revenue. It generates $13 billion in revenue today with great gross margins. Cisco The first products from MarioPremLuca: Cisco Catlyst switches Mario Mazzola Cisco Mario Mazzolla Mazzola was raised in Sicily. His first engineering job was for Italian telecom giant Olivetti in the 1970s and that companys partnerships with Intel brought him to Silicon Valley.
Posted on: Sun, 21 Sep 2014 13:24:11 +0000
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