The American conglomerate brand, Cisco Systems, started in 1984 and is now a forerunner in the IT and computer networking industry. It specializes in multi-technological articles such as the Internet of Things (IoT), remote access devices, and internet services.
Headquartered in San Jose, California, where its founders got the company name, Cisco Systems serves educational institutions, government organizations, and other small to medium groups that require internet and operating network services. Today, aside from continuing its engagement in communication and other networking products to keep its market standing, Cisco is also a corporation committed to reducing greenhouse gas emissions and product waste.
Crossing the 500 Yards: The Brain Behind Cisco’s Beginnings
Leonard Bosack and Sandra Lerner, the founders of Cisco systems, met while studying at Stanford University. They eventually married, and after gaining his Master’s Degree in Computer Science, Bosack worked at his alma mater. Later, he was responsible for managing the computers in the Computer Science Department. Meanwhile, Lerner was employed to care for the computers in the Graduate School of Business. There were 500 yards between the spouses, so Bosack devised a plan to connect the departments’ computers through local area networks (LAN) and a multi-protocol router system.
The company’s original product hails from a joint effort of Stanford students, including Bosack, to link the campus’ computer systems together using the “Blue Box.” It was by previous Stanford electrical engineering graduate Andy Bechtolsheim and faculty member William Yeager.
By 1987, Stanford licensed Cisco to use its software and boards. Bosack, Lerner, and another Stanford employee named Kirk Lougheed, significantly contributed to the mainstream commercialization of LANs to connect computers in multi-protocol router systems.
The brand’s name was taken from “San Francisco,” so pioneers chose to use the lowercase “cisco” in its early stages. Although Cisco changed its logo over the years, its constant vertical lines represent the Golden Gate Bridge.
Cisco’s Early Obstacles to Success
Bosack’s 500-yard experiment was a successful internetworking technology the then spouses offered to computer companies. However, no one showed interest in their product. So, Bosack and Lerner made their own company—Cisco Systems, in 1984. Kirk Lougheed, Bill Westfield, and Greg Setz joined Bosack and Lerner as co-founders.
The couple maintained a tight budget to keep the company afloat. They maxed out their credit cards, mortgaged their dwelling, and even had to hold off on paying their team. Lerner also couldn’t let go of his salaried income.
Additionally, although Stanford eventually let Cisco market its software router and boards, Bosack and his peers were let go amidst the university wanting to file criminal charges for the former employees taking advantage of the school’s intellectual property. Stanford initially sued for $11 million but settled for a $150,000 licensing fee plus free support and routers from the brand.
The Foundation: Cisco’s Early Products
Cisco’s first break happened in 1986, in the form of its pioneer router that can support multiple network protocols. Even if the brand wasn’t the first to sell network nodes, its sought-after router allows various network connections to have flexible operating systems for software upgrades. At the time of Cisco’s pioneer router’s immense success, it sold $250,000 worth of routers and raked in more than $1.5 million in monthly sales. However, the group was only eight employees, making the accomplishment challenging to handle.
While Cisco’s target market was initially research centers, government facilities, and universities, it turned its attention to dominant businesses with scattered branches. The brand worked with these prevalent corporations to prove its inter-networking routers’ efficacy and effectively supported their transactions better than any manufacturer. Even with the threat of more competition, it stood its ground through highly functional but reasonably priced routers.
The Toll of Cisco’s Upgrade
With the breakneck growth was the need for more cash to hold up the company’s operations. So despite its booming sales, Bosack and Lerner risked asking for support from Sequoia Capital. Venture capitalist Donald Valentine answered their funding need, but at a high toll: Valentine will have the controlling stake in the company they built.
As the new chairperson, Valentine installed John Morgridge as the president and chief executive officer. Morgridge fired several of the brand’s managers, who were close friends of the founders. He replaced them with more competent ones with much experience under their belts to push the company forward.
By 1989, the business had reached $27 million in revenues with just three products and 111 employees. On February 16, 1990, Cisco registered on NASDAQ with a $224 million market capitalization.
Lerner and Bosack went from owning the company to being transferred as head of customer service and chief scientist, respectively. Lerner was fired after clashing with Morgridge’s leadership shortly after Cisco went public. Bosack resigned not long after in protest. The couple sold their shares for $170 million, most of which were donated to the charities of their choice. In 2009, they received the “Computer Entrepreneur Award” by the Institute of Electrical and Electronics Engineers Computer Society for launching Cisco Systems.
Acquisitions in Preparation for the Dot-Com Bubble
Cisco is the prime example of a success story propelled by the Dot-Com Bubble. As the most valuable brand during the boom of internet usage, Cisco’s initial $224 million capitalization became $500 billion by late March 2000.
To achieve this success, Morgridge focused on direct selling and corporate consumers. This evolution reflected the fast expansion of linking networks and mainframe computers. Additionally, the company also acquired many firms relevant to its operations.
Cisco’s first acquisition happened in September 1993. It purchased Crescendo Communications, a Copper Distributed Data Interface (CDDI) pioneer. The group was after its Asynchronous Transfer Mode (ATM) technology. Later, Crescendo was renamed the Workgroup Business Unit. Its complementary technologies of slow and complex and fast but simple became a significant part of Cisco’s routers.
The organization purchased Newport Systems Solutions a year later, securing the software needed to bridge LANS and LAN2LAN products. It also acquired Kalpana, a then computer-networking equipment producer, for a $204 million stock swap. Cisco wanted Kalpana for its Ethernet switches and 40% market share. It also took Lightstream Corporation for $120 million cash for its ATM switches.
John Chambers replaced Morgridge as CEO in 1995 and the latter went on to be the chairman. Under their direction, Cisco bought Selsius Systems three years later for $145 million in stock and cash. This purchase was a critical step to advance the business’ VoIP tech.
Cisco: Riding the Wave and Continuing Innovation
Instead of fighting against the rising preference for Internet Protocol (IP) versus multi-protocol router systems, Cisco seized the opportunity and manufactured routers such as AS5200 and GSR. It wasn’t easy to keep up with the internet’s ceaseless demands for changes and upgrades. But Cisco had a firm grip on the segment come 1998.
The industry’s profitability lured many startups to create their own software and hardware. One such startup was Juniper Networks, which took 30% of Cisco’s market share.
The group’s response to this challenge was to manufacture the following products:
- ASICs
- Fast processing cards for GSR routers
- Catalyst 6500 switches
- IOS-XR software
- CRS-1 hardware
Cisco’s Scandals
- Cisco’s 2013 Tech Flaw. Whistleblower James Glenn discovered the faulty security tech in 2008 and reported it to Cisco. A year later, after he was let go, he checked to see if the company had fixed the problem. It didn’t. When he discovered he could still bypass the system, he contacted the FBI. Cisco allegedly sold video surveillance software susceptible to security breaches to critical government agencies such as Homeland Security and US Secret Service. One of the tech’s major defects was letting an attacker gain “full administrative privileges.” The Justice Department and 18 states filed the complaint against the business. The company agreed to pay $8.6 million in civil damages.
- Cisco and the Golden Shield. Falun Gong practitioners filed against Cisco regarding the brand’s participation in creating the “Golden Shield,” or China’s surveillance and censorship system. They accuse Cisco of inciting Chinese officials to purchase their products through provocatory spiels resulting in members of the religion being targeted, tortured, and killed. The company denied the charges.
Cisco and the Pandemic
Cisco stayed true to its corporate social responsibility during the COVID-19 attack. Its CSR report included:
- Presented the Business Resiliency Program that offered a 90-day payment break and 95% product cost deferral
- Prioritized critical customer infrastructure supporting first responders
- Introduced videoconferencing and security products with free trials
- Encouraged 140,000 employees and contractors to work remotely
- Donated to organizations to assist those affected by the pandemic
Cisco maintained its revenue and kept its customers engaged while following health protocols and well-executed remote operations at the height of the pandemic. Further, the company saw high demand for its products during the pandemic recovery, with an astounding 10% product order growth. The only major challenge in their line-up was China, mainly due to the many lockdowns the country imposed.
However, the business also found itself in a bind when lockdowns in China continued in 2022, resulting in declining sales affecting its stock value.
Cisco Today
Cisco continues to innovate and collaborate with other businesses to keep its favorable position in the industry. It promises to strive to deliver the best for its partners and consumers.
The brand is now re-architecting its network to adapt to users’ demands readily. In the future, we can expect Cisco to acquire more firms to strengthen its power and broaden its reach in the software-defined networking (SDN) and Cloud computing departments.
