Cisco: HP, IBM Had Their Chance
At its financial analysts' conference Tuesday, Cisco Systems Inc. (Nasdaq: CSCO) spent a lot of time painting a big picture of a future that includes architecture-level sales and an expansion into 30 adjacent markets.
It's all part of Cisco's ongoing plan to seize market transitions at an early stage: These days, that means a focus on cloud computing, video, and mobility. (See BT, Cisco Claim Cloud Coup.)
But the company also provided some snippets that made aspects of its business a little clearer, or were just plain interesting. Here's a selection of notable points that arose during the day.
But it didn't have to be that way. CEO John Chambers said HP Inc. (NYSE: HPQ) and IBM Corp. (NYSE: IBM) turned down Cisco's partnership overtures a few years ago, when Cisco first decided to tilt its data center plans towards virtualization and what's now called cloud computing.
"I still firmly believe it is in IBM's best interest to work with us. That door is firmly open," he said during an afternoon session.
The same point came up during a press luncheon. Chambers mentioned that Cisco doesn't want to sell storage gear and is happy to provide it through partners. He then added: "I could have done without servers as well, if we'd gotten as tight a partnership as I wanted with an IBM or an HP."
One thing worth noting, though: Analyst Simon Leopold of Morgan Keegan & Company Inc. pointed out during the Q&A session that the growth rate depends on which year you start with -- the weak 2009 figures would make 17 percent growth easy to reach, for instance.
Cisco responded by saying the percentage is meant to reflect growth during normal business conditions and shouldn't be attributed to a particular starting point. CFO Frank Calderoni gave this breakdown of where all that growth is expected to come from:
Table 1: Adding Up to "12 to 17 Percent"
|Item||Number of % points of growth|
|Current Cisco products in their current markets|
|Growth into "market adjacencies"|
|Revenues from new services|
"We believe the right approach for this market isn't a standalone business. We think that vertical integration might be nice for some companies. But we'd much rather partner" with companies such as Accenture , Capgemini , Tata Consultancy Services Ltd. , or Wipro Ltd. (NYSE: WIT), he said. "But you will see us take more project managment responsibility along with our partners."
In other words, Cisco won't be countering HP's acquisition of Electronic Data Systems (EDS).
"While everybody thought it was just a consumer move, we knew immediately that it was going to be a business move as well," Chambers said. (See Cisco's Latest Buy: Flippin' Sweet.)
— Craig Matsumoto, West Coast Editor, Light Reading