M&A Advisory: Cisco should pursue Citrix

Fool’s advice is what I’d give John. Citrix is (strategically) in the same position as Sun. Sun has loads of cool stuff to really kick some asses, it just needed a daddy. Citrix could benefit massively by being under Cisco’s arm. And hey don’t forget Citrix are the Xen dudes. They will eventually rock the knockers out of everyone.

VMware on the other hand is a handsome company that has a massive potential to grow. It would grow better on its own and even faster but it is nearly a non-option given that:

- It’ll be too expensive to buy now
- Software firms empowering virtualization management on top of hypervisors are doing excellently on/with Xen
- It’ll be a different stock by 2010
- Cisco’s biggest enemy/challenge is content, contenders such as Skype (mark my words) are worth the attention not hypervisors- it better keep and spend dollars wisely for the 2018 meltdown

So here’s some more Foolishness:

But since the company already signed three small buyouts in the first half of 2009, a higher pace in the second half still means that they’ve got the shopping bug. Here’s where I see the biggest small- to medium-sized opportunities for Cisco to put all that cash to good use:

• Citrix Systems (Nasdaq: CTXS) as a Cisco division makes sense to me. With a $5.2 billion enterprise value, it’d be a pretty big deal by Cisco’s standards. But in a single blow, a Citrix deal would augment the WebEx corporate collaboration platform and the Telepresence remote meeting system. Citrix’s expertise in remote application delivery makes the deal attractive in its own right — oh, and then there’s the little bonus of giving Cisco some skin in the high-stakes virtualization game. VMware (NYSE: VMW) might not be happy about seeing Cisco’s server systems shipping out with Citrix XenSource installed, but you can’t please everyone, and with its push into Unified Computing Systems, Cisco has shown it’s not afraid to take the risk of upsetting strategic partners.
• Among smaller baits, Cisco could grab network filtering specialist Websense (Nasdaq: WBSN) for about $1 billion — including a decent 20% buyout premium. A Cisco router with Websense security built right in could turn heads and empty wallets.
• Possibly Cisco’s biggest step away from its core networking business was acquiring set-top box maker Scientific Atlanta. If the company wants to bolster that bulkhead in your living room, video recorder pioneer TiVo (Nasdaq: TIVO) is a wild-card that might sell for a song and still get shareholder approval. Video-on-demand specialist SeaChange (Nasdaq: SEAC) would be another strategic fit at an attractive price.

And I haven’t even touched on actual networking opportunities. Now, I wouldn’t bet my entire nest egg on any one of these possible buyout targets, as Cisco hasn’t actually told us about impending deals or advanced negotiations yet. But any or all of these deals would make a lot of sense to me if they were announced tomorrow or next year.

Source

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