Cisco is preparing a poison pill defence against a potential hostile takeover.
The action comes amid furious speculation that its smaller rival Bay Networks is about to be acquired by Nortel, and that other telecomms equipment manufacturers are on the lookout to buy data networking businesses.
Cisco will adopt a shareholder rights plan, a standard method of protecting against takeover, and claims it "will not prevent a takeover attempt, but should encourage anyone seeking to acquire Cisco to negotiate with the Cisco board prior."
Under the plan, preferred stock purchase rights will be distributed as a dividend, at the rate of one right for each share. The rights will be exercised if a person or group acquires or bids to acquire 15 per cent or more of Cisco's common stock.
The market has been alight with rumours that wealthy telecomms equipment makers, notably Lucent and Nortel, are targeting data networking specialists. These firms have acquired a number of niche developers recently but analysts believe they are both looking for a significant player to give them a hefty slice of the data market and many years' worth of research and development.
However, a successful hostile takeover of Cisco would be highly unlikely given its size, financial stability and its ambition to develop an integrated voice and data strategy of its own.
One happy Cisco investor posted his comments on the Silicon Investor Bulletin Board. "I know Lucent and Nortel would love to get Cisco on the cheap but it won't happen. Cisco is just too nimble and very shortly there will be no reason for Cisco to merge with them."
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