"Brook, what is going on? How did Cisco acquire MCI?!!!" Steve Case asked, his expression serious.
"MCI faced financial troubles. The management cooked the books and misappropriated company funds to invest in stocks, resulting in a $250 million loss! Once the news broke, MCI's stock price plummeted. Before I arrived, MCI's market value had fallen from $15 billion to $8 billion!!! Now, the U.S. Bureau of Investigation has initiated a financial investigation into MCI, and those involved in the case have been taken away by the police!!!" Ford Brook shook his head in disbelief.
"Damn!!!" Steve Case couldn't help but yell, "What a bunch of idiots!!!"
It wasn't a pity that MCI was failing, but the collateral damage could hurt others! Steve's face darkened, his expression almost dripping with frustration. MCI was a crucial partner for AOL; by renting MCI's network channels, AOL could offer internet access services and promote its products! If Cisco acquired MCI, the consequences would be dire for AOL—like being cut off entirely!
Steve was deeply unwilling to accept this outcome, maintaining a calm demeanor as silence filled the office. Ford Brook knew that Steve was deep in thought and dared not disturb him. He, too, contemplated potential countermeasures.
After a moment, Steve Case spoke solemnly: "Such a significant acquisition won't be completed overnight!"
"Right, it takes considerable time just to evaluate the assets!" Ford Brook nodded. "MCI itself was developing well, but internal management issues led to its downfall. I'm sure the Cisco family isn't the only one interested in MCI. Many companies will likely have their eyes on it!!! Cisco needs to handle its competition first to secure the deal!"
Steve Case pondered for a moment and then suddenly declared, "Brook, I've decided that we need to buy MCI!!!"
Ford Brook was startled by his bold statement. "Steve, the total market value of AOL is only $9 billion! How can we swallow MCI?!"
"We don't need to fully acquire it—just obtain a controlling stake!"
"However, gaining control of MCI won't be easy. Even after the plunge in stock prices, it still has a market value of over $7 billion…" Ford Brook replied, shaking his head.
Steve Case countered confidently, "We can partner with other telecommunications companies, like Sprint…"
"You mean a joint acquisition of MCI?" Ford Brook clarified.
"Exactly!" Steve confirmed. "By teaming up, we greatly increase our chances of acquiring MCI!!! If Cisco has it, then we have MCI on AOL, and it's uncertain who will come out on top! Even if we're currently in a disadvantaged position, there are always chances to turn things around!"
Ford Brook nodded in agreement.
At that moment, the phone rang, and Steve's executive assistant picked it up. Her face quickly shifted from calm to alarmed as she whispered urgently into Steve's ear, "CEO, Cisco just held a press conference announcing they're prepared to bid $10 billion for MCI!"
"$10 billion? How do they have that kind of money?!" Steve Case exclaimed incredulously.
"Citibank and Morgan Bank have expressed their willingness to provide loans to Cisco, while Cisco is using 20% of its shares as collateral!" the assistant relayed, casting an inquisitive glance at Ford Brook. She recalled how Sequoia Capital had once been a major shareholder of Cisco but had seen its shares diluted to just 2.7% after several rounds of financing—losing even a board seat. Now, Cisco's market value exceeded $50 billion, and based on the trajectory, the stock price was likely to continue rising. Sequoia Capital might truly regret its earlier decisions!
Steve's frown deepened at this news. Cisco's $10 billion bid meant that AOL would need to cooperate with other companies to offer a higher bid. But…
Steve felt a wave of powerlessness wash over him. $10 billion was monumental, and even if AOL was willing to risk everything by pledging all its shares, other companies might hesitate to enter this risky territory! His initial plan to acquire a controlling stake in MCI alongside partners suddenly felt hopeless in the face of Cisco's immediate financial prowess.
"Steve, don't panic; perhaps Cisco is bluffing to scare off competitors!" Ford Brook offered a comforting remark.
"Whether Cisco is serious or bluffing, we must unite more companies and stand strong against them!!!" Steve Case's resolve hardened; he was not ready to admit defeat.
"Absolutely! Sequoia Capital will handle outreach to other companies. We're already in contact with Sprint and their senior management!"
"Good, let's move forward with it!"
---
The acquisition of MCI represented the largest merger and acquisition effort since Cisco's founding. Henry hadn't planned to move on MCI so quickly; after all, its market value was extremely high! However, given MCI's self-inflicted chaos, compounded by the scandal of fraudulent accounting and misappropriating funds for stock trading, investor confidence tumbled, and stock prices followed suit.
When you tempt fate, the outcome often backfires; those who do evil can't escape their just deserts!
At this point, if Cisco didn't seize MCI, it would be a monumental miss!
Under Henry's proposition, John Chambers and the other executives quickly backed the decision. Citibank and Morgan Bank also showed enthusiasm, offering to lend to Cisco!
For Cisco, MCI was an irreplaceable asset. It represented a powerful opportunity!
MCI not only boasted the most extensive internet backbone network in the U.S. but also stood as the second-largest long-distance telephone company nationwide! Losing either of these assets would be untenable. By acquiring MCI, Henry would not only enhance Cisco's internet capabilities but also extend their reach into the telecommunications industry!
As the primary internet backbone provider, Cisco's internet access services would still need to rent telephone lines from telco companies. Owning MCI would drastically reduce the costs associated with internet access fees. Hence, from every angle, Cisco's acquisition of MCI became an inevitable course of action!
However, the acquisition wouldn't be straightforward. MCI's shareholders were numerous and dispersed; the largest held just 6.5% of shares. For Cisco to secure a controlling stake or fulfill intentions to privatize MCI, significant effort would be required, as competition was fierce!
In addition to AOL's coalition, telecom giant AT&T also eyed MCI with interest!
AOL's collaborative efforts proved remarkable; they reached out to more than a dozen telecommunications companies, including Sprint, ANS, and BBN, to band together in bidding for MCI.
In the contest among the giants, Cisco appeared to be the underdog.
"Ha! We didn't bring any brothers, did we?" The Nicholas Group soon asserted that they would partner with Cisco to acquire MCI.
With the combined market value of the Nicholas Group and Cisco approaching $100 billion, they posed a formidable opponent, even to AT&T! In contrast, AOL's combined market cap totaled a mere $60 billion at most!