Drawing on its existing relationship with professional services firm KPMG LLP and its strategic alliance mindset, Cisco Systems, Inc.(Nasdaq: CSCO) announced Monday that it has signed a letter of intent to invest $1 billion (US$) in KPMG’s Internet services business.
The deal, which is subject to regulatory approval, is scheduled to be finalized next month. It will likely face intense scrutiny from regulators who enforce laws that prohibit non-certified public accountants from owning accounting firms.
Should it get the go-ahead, the deal will give Cisco Systems slightly under a 20 percent stake in closely-held KPMG, a worldwide professional services firm that racked up consulting revenues of over $3 billion last year.
It will give the two companies a leg up in providing a full-range of hardware and services to companies who want to take their business to the Internet.
“We chose to make an investment in KPMG’s consulting business because KPMG understands how the Internet will reshape the future of all businesses,” said Cisco Systems CEO, John Chambers. “Under this joint venture, our customers can count on the Internet systems expertise of Cisco and the Internet solutions expertise of KPMG.”
Expanding On An Alliance
The two companies have been working together for some time. According to Chambers, KPMG played a significant role in bringing Cisco’s business to the Web where the company is a leader in e-commerce and Internet applications.
The companies signed a joint initiative back in 1997 with Microsoft to expand KPMG’s network integration practice. A Web site at KPMG-Cisco is dedicated to the alliance between the two.
KPMG CEO Stephen Butler says the market for Internet business is growing at 40 percent a year, a figure that might even be shaded towards the modest side. As the Internet industry matures and Web storefronts come and go, the business services sector is clearly the rising tide in the e-commerce sea.
Cisco Systems has a well-publicized practice of opting for partnerships only if it feels that they will bring in $500 million in revenue after three years. The company has partnerships with Hewlett-Packard and Microsoft. If this investment goes through, KPMG will definitely be elevated on Cisco’s speed dial list.
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