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Cisco Moves In on Gadzoox

Cisco Systems Inc. (Nasdaq: CSCO) took another cautious step into the storage networking world this week, when two of its senior executives joined the board of Fibre Channel switch vendor Gadzoox Networks Inc. (Nasdaq: ZOOX).

On the surface, this seems like a fairly innocuous announcement. However, Cisco recently vowed to dominate this sector within the next two to three years (see All Eyes on Cisco). That may explain why the appointment of Steven M. West (a member of Cisco's board of directors) and Sylvia Summers (group VP of Cisco's service provider business unit) to the Gadzoox board promptly set off rumors on Wall Street of a possible acquisition bid.

"Gadzoox must have something Cisco is interested in," says William Hurley, storage analyst with the The Yankee Group. "The world is awash with Cisco board members, but this is a clear sign the company is throwing more weight around in this space to gain influence."

Simon Weeden, M&A specialist at Goldman Sachs & Co., is less certain: "Putting people on the board is an unlikely route to an acquisition, as it is a rather public statement of interest, although this doesn't mean that an acquisition might not happen later."

Cisco refused to comment on the acquisition speculation. However, Mike Volpi, Cisco's chief strategy officer, has said that he is looking for companies with a mature development cycle. "We can afford these now because of the low valuation of the stock market," he recently told a

Gartner Group
networking conference.