& cplSiteName &

Cisco: HP, IBM Had Their Chance

Craig Matsumoto
12/9/2009
50%
50%

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.

  • Cisco wanted to partner with HP and IBM. Of course, Cisco ended up annoying both of them by getting into the server market. (See Cisco: Yep, HP's a Competitor.)

    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."

  • UCS is underway. Three service providers are going all-in with the Unified Computing System (UCS), adopting Cisco's full plan for the data center, said Rob Lloyd, Cisco's executive vice president of operations. One of them, Savvis (Nasdaq: SVVS), got announced yesterday. (See Savvis Gets Cloudy With Cisco.)

  • Sticking to '12 to 17 percent.' That's still Cisco's projection for long-term revenue growth, and it still bothers financial analysts.

    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
    9 - 11
    Growth into "market adjacencies"
    1 - 3
    Revenues from new services
    2 - 3
    Source: Cisco




  • Cisco won't acquire for services. That "new services" line in the table consists of Cisco doing consulting kinds of jobs, helping customers use the network to change their business processes. Cisco has 5,000 people handling services, but Chambers said the key will be to work with partners.

    "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).

  • Flip means business. Cisco considers its Pure Digital Technologies acquisition -- source of the Flip video camcorder line -- to be a consumer and enterprise play. The proof is in the FlipShare software that allows easy sharing of video on social media platforms, Chambers said. That's opening new possibilities in collaboration, which, of course, is Cisco's hot button among enterprise trends.

    "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.)

  • No smartphones. No radio access network. People keep asking when Cisco will get into these areas, but what the company really wants is an area where it can grab a "sustainable advantage" because the market isn't moving fast enough, according to Chambers. Smarphones are out, then -- they're already moving plenty fast -- and the RAN doesn't offer many chances for Cisco to stand out.

  • CRS-1 gets bigger. While they didn't mention specific customers, executives seemed to go out of their way to mention an eight-chassis CRS-1. That would seem to imply that eight chassis is the new benchmark for the biggest CRS-1 installations out there. Recall that up to 72 CRS-1s can be hooked together, which was at least enough to impress the Guinness people. (See Cisco Grabs a Guinness.)

    — Craig Matsumoto, West Coast Editor, Light Reading

    (1)  | 
    Comment  | 
    Print  | 
  • Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
    Pete Baldwin
    50%
    50%
    Pete Baldwin,
    User Rank: Light Beer
    12/5/2012 | 3:51:20 PM
    re: Cisco: HP, IBM Had Their Chance


    After talking with Simon Leopold, I think I better understand why Wall Street doesn't like the 12-17% figure.  It's not quantifiable, oddly enough.  Cisco is talking about 12-17% growth in normal business conditions -- meaning, it could actually be there now, were it not for the economy. That's tough to measure.


    Put another way:  IIRC, Cisco said yesterday that it enjoyed 16% CAGR in revenues from 2004 through 2008.  But if you shift it to 2005 through 2009, you get 9%.

    Featured Video
    From The Founder
    The world of virtualization is struggling to wrench itself away from the claws of vendor lock-in, which runs counter to everything that NFV stands for.
    Flash Poll
    Upcoming Live Events
    March 20-22, 2018, Denver Marriott Tech Center
    March 22, 2018, Denver, Colorado | Denver Marriott Tech Center
    March 28, 2018, Kansas City Convention Center
    April 4, 2018, The Westin Dallas Downtown, Dallas
    April 9, 2018, Las Vegas Convention Center
    May 14-16, 2018, Austin Convention Center
    May 14, 2018, Brazos Hall, Austin, Texas
    September 24-26, 2018, Westin Westminster, Denver
    October 9, 2018, The Westin Times Square, New York
    October 23, 2018, Georgia World Congress Centre, Atlanta, GA
    November 8, 2018, The Montcalm by Marble Arch, London
    November 15, 2018, The Westin Times Square, New York
    December 4-6, 2018, Lisbon, Portugal
    All Upcoming Live Events
    Hot Topics
    Has Europe Switched to a Fiber Diet? Not Yet...
    Ray Le Maistre, Editor-in-Chief, 2/15/2018
    Will China React to Latest US Huawei, ZTE Slapdown?
    Ray Le Maistre, Editor-in-Chief, 2/16/2018
    IBM, Microsoft Duke It Out Over Chief Diversity Hire
    Sarah Thomas, Director, Women in Comms, 2/15/2018
    5G: The Density Question
    Dan Jones, Mobile Editor, 2/15/2018
    T-Mobile Injects AI Into Customer Service
    Kelsey Kusterer Ziser, Editor, 2/16/2018
    Animals with Phones
    Live Digital Audio

    A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

    Like Us on Facebook
    Twitter Feed