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Optical/IP

Cisco's Billion Dollar Plays

SANTA CLARA, Calif. -- John Chambers, president and CEO of Cisco Systems Inc. (Nasdaq: CSCO) broke out the revenue potential and timing of six key technology markets that Cisco believes will drive future growth, during his morning keynote at the company’s worldwide analyst conference here in rainy Santa Clara.

The technology areas that Cisco expects to attain $1 billion markets, in order of current size, are:

  • Security
  • Networked homes
  • IP telephony
  • Optical networking
  • Wireless LANs
  • Storage
Chambers said Cisco’s goal in each of these new technology markets is to get to $1 billion in revenue within five to seven years from when it entered the market, and that Cisco is headed for that goal with each of these technologies.

“At the present time all of them are headed in the right direction, but if we hit half of them that’s a pretty good job."

The Cisco CEO stressed that Cisco as a company aims to practice what he preaches about IT productivity. Cisco’s internal focus was on increasing productivity in terms of both revenue per employee and customer satisfaction.

Chambers said customer satisfaction is one of Cisco’s key metrics, which it uses to rank each employee in the company. He cited a survey from Heavy Reading, Light Reading’s market research division, that indicates that Cisco ranked No. 1 among equipment vendors in the eyes of most carrier employees, emphasizing the need for Cisco to execute on service providers’ positive perception of his company (see Cisco Winning Market Perception War).

[Ed. note: The Heavy Reading 2003 Telecom Equipment Market Perception Study examines the market perceptions of over 700 service provider employees around the world.]

In a Q&A session, Chambers also addressed a print advertising campaign that Juniper Networks Inc. (Nasdaq: JNPR), Cisco’s largest competitor in the router market, is running in the Wall Street Journal. (The campaign, which uses cartoons to disparage Cisco, also may be viewed on Juniper's Website.)

“These cartoon ads have grown increasingly disparaging,” one audience member said. “This is some serious trash talking."

“In terms of how we deal with competition [Cisco] likes to play with class and… talk about what we’re doing, and about the positives within the company,” responded the CEO. “As a coach you don’t let your players make a lot of negative comments about the opposition because they get fired up enough as it is.

"[The Juniper campaign] surprised me because Juniper usually plays with a lot of class, and we are seeing some different behavior from them. Will we follow similar approaches? Absolutely not!”

In response to another question, Chambers said that Cisco’s strategy in selling IP telephony revolves around selling it as an entire network.

“I think the decision [about IP telephony] is already done. The question is whether they will do it with a single network. It has to do with where are you in making pinpoint decisions or network decisions, or network-to-network decisions."

Refining a long-running sales theme, Chambers stressed that, as always, the heart of Cisco’s message is that it can increase productivity with new network technologies.

Increased productivity has a “one-to-one correlation” with capital spending in the IT sector, he said, and continued growth in productivity will drive more capital spending, which in turn will create new jobs.

“We expect our customers to see their business improve, then they’ll spend on capex. Then they’ll watch that for a while, then we’ll see jobs.

“The reason I’m optimistic about not just the next year, but the next decade is productivity and the leverage you get from it. At 5 percent GDP growth, which I think is possible, you can double productivity every 14 years.”

— R. Scott Raynovich, US Editor, Light Reading

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Balet 12/5/2012 | 1:26:48 AM
re: Cisco's Billion Dollar Plays signmeaup wrote:

...Having extensively tested and at times be a remote systest person for the 15454 MSTP/MSPP/ect. I can most assuredly state that it is NOT the best platform out there. Sure if you compare it against a 10 year old platform from LU or NT, but then again that ain't hard to beat...

Could you please point me to any novel platforms fro LU or NT that are competitive in performance to Cisco 15454?
It looks like both Lu and NT don't have any product development folks staying and working on new generations products.
Balet 12/5/2012 | 1:26:48 AM
re: Cisco's Billion Dollar Plays BobbyMax said:

...John Chambers has not said anything new that he has not said before. It is the same old dirty trick to talk about the markets and sell its products at three times the regular price. The only reason that Cisco stays in business is that it sells its goods at a high price...

Please help me out. I 've been always close to the bottom of the food chain in modules and components business. Cisco has always been the toughest price pusher out of all of them, at least in optical area.
Why are they selling so high? What are their margins, 70-80%? Why anyone is buying so overpriced products?
deweyduck 12/5/2012 | 1:26:43 AM
re: Cisco's Billion Dollar Plays Is this 'play' big engough? This is the begining of the avalanche we will see to VoIP

Boeing Picks Cisco for IP Telephony

Cisco Systems said Boeing has selected it to provide Internet Protocol telephony technology for a massive VoIP deployment across the aerospace and defense contractor's worldwide communications network. The deal will include 180,000 Cisco IP phones and 125 switches....Boeing will roll out Cisco's Internet Protocol (IP) phones across its worldwide operations, which employ over 150,000 people in 48 states and 70 countries, Cisco says. Because calls made using VoIP (voice over Internet protocol) technology are carried over data networks, they are cheaper than traditional phone services, which require a single dedicated line for each call.

http://www.newsfactor.com/stor... phony&story_id=25857
IP Observer 12/4/2012 | 11:11:14 PM
re: Cisco's Billion Dollar Plays Who is Cisco trying to kid? Their tactics when it comes to not playing by the rules are legendary. In fact, the behavior from Juniper is behavior they learned from Cisco. Both Cisco and Juniper use unthetical tactics. It is one thing to spread FUD it is quite another to outright lie. Both vendors do this quite regularly and it is not limited to sales executives.
fw23 12/4/2012 | 11:11:14 PM
re: Cisco's Billion Dollar Plays
I have to take time out to thank John Chambers
for filling saying enough is enough with regard
to the sleazy campaign that Juniper is running.

You would think that with its perception problems
with customers, as PROVED by SCIENCE by
HEAVY READING----With Juniper not making any
MONEY for investors and with Juniper taking
on more and more debt, that Scott would have
more than enough problems at home to take
care of.

But RATHER than WORKING or INVESTING to build
customer awareness in the market, Juniper is
attacking the market leader. Sorry boys, but
thats a non-starter.

The rust inside of Juniper is finally working
its way through the whitewash. Nobody knows
who they are (THANK YOU again HEAVY READING)
and I still wonder about trickery in their
books.

I know I'm going to get attacked by the juniper
employees for telling the TRUTH like this, but
I think most of the better informed people
on this board can see through their
self-interested attacks.

So all you lunk-heads in the peanut gallery
can talk about bases all you want. Just as
with Juniper's trash-talk campaign, its going
to get you and them nowhere.

fw23 12/4/2012 | 11:11:12 PM
re: Cisco's Billion Dollar Plays >Both vendors do this quite regularly and it is >not limited to sales executives.

I agree. But Cisco is a market leader and
nobody can stop them unless a real company
shows up to challenge them. And the only
way to challenge them is with BRAINS who
used to be at cisco, who know the cisco
strategy, who know how cisco thinks. Cisco
people can beat cisco. Nobody else can.

Juniper, in the early days, had the brains
but Scott left the gate open and the dolphins
all bolted to the NEXT BIG THING as soon as
the pond filled with sharks.

The dolphins learned their lesson though and
when a chain-smoking shark tried to poison the
new pond, the dolphins sent him packing.

I know some of the guys in the cheap seats or
those new to our world <\b> will not
understand. But those IN-THE-KNOW will figure
it out. ;)

lilgatsby 12/4/2012 | 11:11:12 PM
re: Cisco's Billion Dollar Plays I can see their focus on the other 5 areas, and they are strong. But optical is not their cup of tea, aside from the 454. I don't see the 540 or 808 flying out the doors...so where does $1B in "optical" come from???

Curious readers want to know...

lg
tsat 12/4/2012 | 11:11:11 PM
re: Cisco's Billion Dollar Plays The fact that:

-Someone asked Chambers about it
-Chambers acknowledged it
-His response made it to Dow Jones Business Newswire

only proves the effectiveness of the Juniper campaign.

What do they say in Hollywood? There is no such thing as bad publicity.

I am sure juniper.net is getting thousands of hits right now to check out these cartoons.

-tsat
tsat 12/4/2012 | 11:11:11 PM
re: Cisco's Billion Dollar Plays The fact that:

-Someone asked Chambers about it
-Chambers acknowledged it
-His response made it to Dow Jones Business Newswire

only proves the effectiveness of the Juniper campaign.

What do they say in Hollywood? There is no such thing as bad publicity.

I am sure juniper.net is getting thousands of hits right now to check out these cartoons.

-tsat
fiber_r_us 12/4/2012 | 11:11:10 PM
re: Cisco's Billion Dollar Plays The '808 is end-of-life'd... no market/revenue there.

The '540 is moving some product, but the Nortel 5200 dominates here.

They must be counting on the '327 and '454 stuff as well as the 156xx...

I'm sure John would like to see $1B/year here, but... good luck!
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