Grand Junction Networks

Charney and his team were making their own projections, and they decided it was time to file for an IPO. On July 31, 1995, Grand Junction chose Goldman Sachs to be its lead underwriter. Charney scheduled meetings with lawyers and accountants. Grand Junction drafted its notice to the SEC.

"There was wealth on the horizon," Gould remembers. "But up until then, no one really knew how to calculate it."

Then Cisco called. Charney remembers the opening gambit: "We would like to discuss your products and how we might sell them," said Mario Mazzola, a top Cisco executive. "Can we talk?" The savvy CEO didn't need an interpreter: "I couldn't imagine that he just wanted information."

Cisco kept calling - and each call became more direct. Charlie Giancarlo, who had helped run Kalpana Inc., a LAN-switching company that Cisco had bought, praised Kalpana's deal. He told Charney that his operation now had more resources to work with - that it had done in one year with Cisco what it might have needed three or four years to do on its own.

A few weeks went by. Grand Junction was set to drop its smashing third-quarter results into its SEC filing. Plans for the road show were firmed up.

Then John Chambers called and asked for a meeting. Cisco's CEO got right to the point: Why take Grand Junction public when Cisco was ready to offer $200 million in Cisco stock? Charney relayed the offer to his board, which recommitted to an IPO. But then he and his board started asking some tough questions. What if Cisco bought a rival company, armed it to the teeth, and tried to blow Grand Junction out of the water?

Chambers raised his offer: $225 million. Then he raised it again: $275 million. "Finally," Charney says, "he asked, 'What will your board take?' I said something in the neighborhood of 5 million shares." Chambers called back: "John said, 'I'm not paying more than 5 million shares.'" Cisco was trading at $65 a share. That came to $325 million. Charney said, "I'm not selling for one share less!"

Chambers left the country on a business trip. Cisco's stock rose to $70 a share. Great, Charney thought. But what if the share price moved the other way? The two CEOs discussed a standstill accord: 5 million Cisco shares at $69 a share - or $345 million. Cisco had made an offer that Grand Junction couldn't refuse.

A few days passed, and then came the weekend. On Monday, Charney called the impromptu staff meeting with Pelsma and her colleagues. "Here we were just weeks away from an IPO," she recalls. "It was like something was being dangled and taken away." Charney softened the news as best he could. But the bottom line was that they were Ciscotians now. "Howard was not exactly jumping up and down," Pelsma remembers.

The Fremont speech took place two years ago. Howard Charney has just delivered another speech - this one to half a dozen executives, all big-time customers of Cisco Systems. John Chambers had been scheduled to give this state-of-the-technology presentation, but something came up. So Charney took his place. "I meet as often as once a week with companies that have an international presence," he says. "It's a Who's Who of the industrial world."

Not bad. In two years, Charney has gone from being the CEO of yet another Silicon Valley startup to standing in for the CEO of the third most valuable company on Nasdaq. He is sitting in his office, which is not much larger than an oversized cubicle. He works on Cisco's San Jose campus in Building M, headquarters of the Small/Medium Line of Business, which he runs in his role as a Cisco senior vice president.

Maybe selling out isn't so bad after all. "I'm still running an operation whose mission is managing lives and technology," he says. "But I don't worry about cash flow. I don't worry about having enough R&D money to keep up with the big boys. We are the big boys." Charney reviews the other benefits of the Cisco transaction: "There were 40-plus millionaires created," he says. "We gained wider distribution channels. Cisco projected we'd do $119 million the first year. We did $124 million. We'd never have done that on our own."

So goes the short answer. The long answer is more textured. It starts this way: "Any company that acquires you, and says you're going to stay autonomous, is giving you a crock." Charney understands that the people who work for him aren't energized by the strategic advantages that Cisco offers. They care about what it feels like to be at the office. "What do people come to work for?" he asks. "To be successful. To be appreciated." Engineers, he adds, share one all-consuming goal: to ship great products. And shipping products is different at Cisco.

"At Grand Junction, it was 'Ready, set, go!'" he says. "Going from R&D to 'out the door' took weeks. At Cisco, transferring a product from engineering to manufacturing is a big deal. There are international standards to be followed. There are integration issues to be concerned with. The software, the manufacturing - we have to give it all a common look and feel."