Vic & Janie Tsao

elling your company for half a billion dollars to an industry giant , then being asked to stay on to run it, may well be the American Dream for the hi-tech age. Victor and Janie Tsao made that dream come true by betting their 15-year-old company on a risky early plunge into the 802.11g wireless local-area networking standard.

     The 11g standard wasn't due to be finalized until June 2003 at the earliest. The Tsao's decided to risk going into production of their Wi-Fi access points and PC cards based on draft standards. To minimize the risk of its hardware being rendered obsolete by last-minute changes to the 802.11g standard, Linksys engineers allocated as many parameters as possible to software. By getting a jump on competitors the Tsao's hoped to enjoy a boost from Christmas sales despite gloomy economic forecasts for the tech sector.

     Consumer enthusiasm exceeded anything the Tsaos had imagined. By the first quarter of 2003 Linksys found itself with a half million orders for 802.11g access points and a critical three-month lead over rivals. It was that nimble responsiveness that caught the attention of networking colossus Cisco Systems. Its management was so impressed with the business style of the Irvine-based mom-and-pop that in April 2003 it offered $500 million and invited the Tsaos to stay on as CEO (Victor) and CFO.

     That's impressive for a tiny company that had found a niche retailing gear to small businesses wanting economical local-area networks (LAN). It's even more impressive that an industry leader like Cisco has seen fit to let Linksys remain a distinct division responsible for its own brand name.

     In 1988 the Tsaos had an idea for a product to let several computers share a single printer. At the time Victor was working as an IT exec for Irvine-based Taco Bell and Janie was a programmer for the retail conglomerate Carter Hawley Hale. They had two young sons aged 2 and 4. It was something of a gamble when they decided to have Janie quit her job to start Linksys and financed the company from savings.

     Fortunately, the company's first product was a modest success. By 1991 Linksys was generating enough profits to let Victor quit the Taco Bell job and come aboard as Linksys's Mr inside. He oversaw operations while Janie traveled around the country drumming up retail customers.

     Growth was slow for the first decade. Sales didn't really start taking off until 2000 when Linksys moved aggressively to address the needs of homes and small businesses that wanted to take advantage of cable and DSL broadband connections by networking computers. Oddly, the couple's first big success was in supplying routers in Canada, possibly because other companies had avoided that market due to hardware compatibility issues. By rolling up their sleeves and finding a way to make their routers work there, Linksys won a solid foothold in a lucrative market. That experience gave them the confidence to exploit the opening they saw in being first to market with 802.11g wireless routers just in time to tap burgeoning consumer enthusiasm for wireless nettworking.

     At the time of the deal with Cisco, Linksys had grown to 300 employees and could claim 39% share of the nascent home wireless networking market. That's puny by the standards of a giant like Cisco. Yet what looks like a fairy-tale ending for the Tsaos may turn out to be the beginning of a new era for Cisco. Since the tech bust, the networking giant had been struggling to recover its vaunted reputation as an innovative industry leader. The nascent Wi-Fi industry may well be its golden opportunity, with a 35% per year projected growth rate. Its newly-acquired image as a leader in that segment may well make Linksys the silver bullet that helps Cisco hit its growth targets for the wireless era.

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Victor Tsao

“By 1991 Linksys was generating enough profits to let Victor quit the Taco Bell job and come aboard as Linksys's Mr inside.”

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