Cisco is a ____ company? Strong push into data centers

Introduction:

With all the recent announcements, we wonder what kind of a company Cisco has evolved into?  They seem to want to provide a solution to every conceivable IT market segment.  This morning I heard a KCBS radio commercial about Cisco delivering movies over a private network in a dentist’s office.  Later today, I read in the NY Times that Cisco and EMC have formed a joint venture to pursue the data center market for large business (see text below).  

This afternoon, I attended a Telecom Council session where Cisco Sr VP Kelly Ahuja talked about the explosive growth the company expects from the mobile Internet.  Their big play in this area has to be the acquisition of Starent Networks for $3B- a prominent wireless packet core vendor.   For more on the Starent acquistion see:

Assessment:   

For sure, Cisco is drifting far away from their flagship multi-protocol/IP routing and Ethernet switching roots.  Last week they acquired an Internet security firm.  It appears Cisco is transforming itself into an amalgamation of many different companies. They want to be an Internet software company (Web Wx, Internet security), consumer electronics company for the connected home, cable and satellite TV  set top box provider, video conferencing for business. 

It’s hard to characterize and evaluate such a company.   Here is what Breaking Views web site had to say: 

"The tech giant has spent $22bn on deals since 2002 and repurchased $60bn of stock over the decade. The return to investors: zero. Now Cisco also looks unwieldy with its 59 standing committees. Cisco should admit its strategy isn’t working."
Cisco is also chided for their generous use of stock options as employee compensation.
 
Read more at:
 
 
 
Opinion:  
 
I don’t agree with Breaking Views’ suggestion that Cisco be broken up "into more manageable chunks."  Instead, CEO Chambers should better articulate Cisco’s corporate strategy and direction to reassure shareholders, customers, and partners.

What do readers think?  Please comment in the box below.

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NY Times:  Cisco and EMC Form Venture to Serve Data Centers

Cisco Systems took another step to expand its computer hardware businesses on Tuesday by forming a broad partnership with EMC, a maker of storage equipment and software.  The two companies announced on Tuesday that they had created a joint venture called Acadia that would work to sell their data center equipment to businesses. The new venture will focus on designing and building systems that rely on virtualization technology, which can help customers create a more flexible technology infrastructure and lower their capital spending costs. For Cisco, the arrangement should aid the company’s efforts to sell its nascent line of computer servers and increase competition against the likes of Hewlett-Packard, I.B.M. and Dell.

Cisco has long been the dominant supplier of networking equipment like switches and routers for corporate data centers. But, earlier this year, the company expanded into the computer server market as well, placing it in direct competition with traditional partners like H.P. and I.B.M.
 

http://www.nytimes.com/2009/11/04/technology/business-computing/04cisco.html?_r=1&ref=technology
 

 

0 thoughts on “Cisco is a ____ company? Strong push into data centers

  1. Postscript: Cisco Systems said net income fell 19% in its fiscal first quarter to $1.79 billion, or 30 cents a share, down from $2.2 billion a year earlier. Revenue fell 13% to $9 billion. Cisco said lower sales offset its improved margins, but said business is improving from recent quarters and that economic outlook also has improved.

  2. Follow up: Cisco’s revenue from the U.S. and Canada declined 10% for the quarter compared with the year-earlier period, a smaller drop than the 13% fall for the region in the previous quarter.

    Mr. Chambers said orders in the U.S., an indication of future revenue, were flat year-over-year. Sales in Japan grew during the quarter, and Europe had a smaller decline than the previous quarter.

    In recent weeks, Cisco has backed up its optimistic view of the economy by spending its cash hoard, which totaled $35.4 billion as of the end of the quarter. Since the start of October, Cisco has spent more than $6 billion on four acquisitions, including multi-billion dollar deals for video-conferencing company Tandberg ASA and wireless-equipment maker Starent Networks Corp.

    On Tuesday, Cisco announced that it was launching a joint venture with EMC Corp. to assemble and install computer systems from the companies.

    The deals are a better “indication of their [Cisco’s] confidence in the economy than anything they can say,” said Simona Jankowski, an analyst at Goldman Sachs Group Inc., who added that the quarter was “a very nice beat.”

    Mr. Chambers said Cisco would continue its aggressive streak, taking advantage of opportunities to expand whenever possible. He added that Cisco planned to increase hiring and that he expected the company’s expenses to begin to rise.

    For the current quarter ending in late January, Cisco said it expects revenue of $9.2 billion to $9.5 billion, an increase of 1% to 4% from a year ago. That’s well above Wall Street’s estimates, which anticipated another decline.endit.

    Write to Ben Worthen at ben.worthen@wsj.com
    http://online.wsj.com/article/SB10001424052748704013004574515882467219304.html (on line WSJ subscription required)

    After Cisco reported a 19% profit drop and a 13% revenue fall for its fiscal first quarter earnings Wednesday, the Cisco chief executive issued some rather forceful pronouncements on the outlook for the economic recovery. Cisco’s business making switches, routers and other hardware to direct data traffic over private networks and the Internet, helps make the company a bellwether for corporate technology spending. Here are some of the highlights.

    On corporate tech spending plans: “They are making their decisions. They are getting their foot, perhaps, off the brake. Some of them are starting on the gas pedal. But very few are doing what Cisco is doing, which is putting the gas pedal all the way down.”

    On the economic recovery: “We were very pleased with our Q1 and saw a number of positive signs this quarter in the economy and in our business, especially compared to the sequential financial results and improvement and especially in those in the US from Q4 to Q1. If we continue to see these positive trends for the next one and two quarters, we will believe that there will be a good chance we will look back to see that Q3 was in fact the bottom, that Q4 was the tipping point, and the recovery started aggressively in Q1 of fiscal ‘10.”

    More on the economy: “We are seeing very tangible results that the recovery, at least the initial phase of the recovery, is gaining momentum.”

    On orders: “In our opinion, Q1 FY 2010 results, especially in the U.S., again follow our normal sequential order patterning, indicating that the initial phase of the recovery is underway, based upon this under order momentum. While the continued strength of the recovery and eventual job creation may still be in question, we are clearly basing our decisions and our investments upon an optimistic evolution of the economy.”

    http://blogs.wsj.com/marketbeat/2009/11/05/ciscos-chambers-very-tangible-results-on-recovery/ (on line WSJ sub required)

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