Bond investors are also nervous after bankruptcy filings by NorthPoint, ICG, and other competitive local exchange carriers, known as CLECs. As a result, the flow of money to CLECs has been choked off, starving some worthy business plans, says Cisco Chief Strategy Officer Mike Volpi. The capital market isn't operating efficiently right now. A lot of good ideas aren't getting funded. To pick up the slack, Cisco may take stakes in companies it does business with, something it hasn't made a habit of.
Cisco knows how to make money from Internet growth.
So, with conventional investors sitting out the next generation of Net innovation, Cisco has stepped in. Last January, CEO John Chambers started talking about the possibility of Cisco's product-development costs increasing because the company would have to invest in product platforms earlier in their life cycle. Sure enough, Cisco bought almost as many companies in 2000 as it did in 1998 and 1999 combined. Many of them were early-stage companies. With that business preparing for an initial public offering, Cisco is likely to reap a healthy return on its investment while keeping a minority stake in the company.