Cerent Corporation

The case examines the issues surrounding an acquisition bid by Cisco for Cerent, an optical networking company. At the time of the case, in August 1999, Cerent had recently filed for an initial public offering. Several other optical networking companies with little operating history and no profits, but very “bright” futures had recently taken the public markets by storm with IPOs and subsequent stock performance that was exceeding all previous expectations. Four months prior, Cerent had rejected an acquisition offer by Cisco, however now Cisco was offering close to 20X their previous bid. Carl Russo, the CEO of Cerent needed to decide whether to accept the offer and become a part of Cisco or continue with the company’s plans to go public. Teaching Note available.