The company has been expounding on the benefits of an integrated network and has made clear its intentions to wrap support for voice into its strategy for some time. Yet today's $2 billion acquisition of GeoTel Communications is the most substantial move Cisco has made to grab the technologies it will need to compete in what it calls the 'new world.'
The GeoTel purchase represents the second largest of Cisco's 33 total acquisitions, trailing only its 1996 deal for high-end switching firm StrataCom.
The purchase furthers Cisco's goal to bring its Internet and data-based networking expertise to the world of voice networking, long dominated by the likes of Nortel Networks, Lucent Technologies, and international giant Alcatel.
What GeoTel offers Cisco is the necessary software to provide advanced services to voice customers, an area where it has not previously had any presence. GeoTel makes a set of advanced software that allows call centers--like company catalog order divisions--to implement sophisticated phone-based customer service programs using call routing and other information gathering techniques.
"Call center is the killer voice application," said Don Listwin, executive vice president for Cisco. "This allows us to do anything an 'old world' player like Lucent can do."
GeoTel and Cisco share a common set of customers, according to executives, including British Telecom and Sprint. Given GeoTel's software focus and Cisco's push to bring voice to the Internet, the combination should open new opportunities for the data networking giant.
"We were constantly being asked, 'What is your vision and strategy for combining voice and data?'" noted John Thibeault, president and chief executive of GeoTel, who will report to Listwin once the acquisition closes, expected by the end of June.
Analysts said the move is not surprising, given the tenacity with which Cisco has revved its marketing engines and acquisition forces to aid its goal to combine voice, video and data traffic across an Internet protocol (IP)-based network, replacing older circuit-based systems.
"It does underscore the importance of enterprise voice services technology to Cisco," said Chris Nicoll, principal analyst for carrier infrastructure at market watcher Current Analysis. "They need to combat Lucent and Nortel's traditional strength."
Nicoll said the acquisition underscores the direction telecommunications firms are heading. The cash cow for voice and data service providers won't be found in the simple transport of traffic across networks, but in how those data bits are managed, he added.
Listwin compared today's deal to Cisco's acquisition of Crescendo Communications in late 1993, the firm's response to a growing trend toward data switching devices. Terming the similar moves "strategic insertion" buys, Listwin said that like Crescendo, GeoTel may serve as the key to developing a potentially lucrative new market for Cisco.
Cisco went on to add several other switch-oriented firms around the Crescendo purchase. Now Cisco gains more than $4 billion in revenue annually from its switching business.
The GeoTel acquisition follows last week's $445 million buying spree that added new equipment to Cisco's arsenal for so-called converged voice, video, and data network layouts.
Competitor Lucent characterized Cisco's GeoTel buy as a "reactive move" to make up ground in the call center software market--one of Lucent's classical strengths. A Lucent spokeswoman said over 18,000 business sites use the company's call center software worldwide.
The deal will be accounted for as a pooling of interests, according to Cisco. The board of directors for each company have approved the acquisition.