Cisco Doubles Down on China
That investment follows approximately $8.5 billion that the company has spent in China since 2002. Most of that money has gone to the procurement of China-based components and services, which the company estimates at about $7 billion.
Cisco says the financial commitment will include significant increases in materials procurement, education, research and development, direct and indirect investments, and sales and service operations.
As part of the announcement, the company says it will donate more than $6 million to help establish 300 new Cisco Networking Academies over the next three years, in cooperation with China's Ministry of Education. The company currently has more than 200 academies in 70 cities throughout China.
Cisco announced a memorandum of understanding to work with Alibaba.com Hong Kong Ltd. , which owns China's largest online business-to-business portal, to expand services to small- and medium-sized businesses throughout China. That agreement comes on top of a previously announced $17.5 million investment in subsidiary Alibaba.com Ltd., as part of that company's IPO on the Hong Kong Stock Exchange.
Cisco also plans to increase funding for its Cisco Systems Capital China arm, as a way to offer financing to Chinese customers of its networking equipment. The company sees funding for Cisco Capital increasing by up to $400 million during the next three to five years.
Finally, the company plans to work with the China Development Bank to encourage investment in local companies with high growth potential. That comes on top of an estimated $700 million that Cisco says it has already invested in Chinese companies.
Cisco's announced China initiative comes as part of its tour of developing markets over the last several days.
Earlier this week, the company announced a partnership with Indian IT firm Wipro Ltd. , and a planned expansion of its Indian workforce from 3,000 employees there to 10,000 over the next three years. (See Cisco Visits China and Cisco's Triple Play.)
Cisco expects its investments in emerging markets to pay off big in the future, and analysts see this as a huge opportunity for the company.
In a research note issued before the announcement, Lehman Brothers analyst Inder Singh notes, "Cisco is targeting emerging markets (130 countries) to drive growth, representing 30% of CSCO's growth and a $10B opportunity. The company expects 30%-50% emerging markets growth going forward."
— Ryan Lawler, Reporter, Light Reading