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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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fw23 12/4/2012 | 11:11:10 PM
re: Cisco's Billion Dollar Plays Everyone is overlooking the obvious. Cisco has
lots of cash and they could just purchase
a new company with a breakthrough product
ready to ramp up in sales to $1b.

Could it be that they are looking at Corvis?
Its unlikely that Dr. Huber would sell, but
still with their products being LIGHT-years
ahead of the competition, its an interesting
prospect for cisco.

aspicer 12/4/2012 | 11:11:10 PM
re: Cisco's Billion Dollar Plays But everyone interested in the cartoons running to Juniper's site ... doesn't make buying decisions for Juniper hardware.

Personally I'd think that anyone with the responsibility to purchase equipment from Juniper or Cisco (or whatever company) wouldn't be impressed by them having to stoop to bashing Cisco with cartoons to gain market share.

I think Cisco made money the old fashioned way. They earned it. So goes with their market share. They are smart to stay out of the cartoon bashing business (anywhere).
cyclical 12/4/2012 | 11:11:10 PM
re: Cisco's Billion Dollar Plays another cisco bashing ad from juniper
jeb_knucklehead 12/4/2012 | 11:11:09 PM
re: Cisco's Billion Dollar Plays fw23-

Uh... they may have $1B in cash but who are they going to buy in optical that will have sales like that to ramp them to $1B? I don't think that company exists in optical right now. Cash is only cash. It can buy you lots of pretty things but it can't take the place of hard work and ingenuity. Right now there's no killer optical product, solution, or company that will get them to $1B.

I say good luck.
fiber_r_us 12/4/2012 | 11:11:09 PM
re: Cisco's Billion Dollar Plays Somebody help me! I can't tell if fw23 is a:

1) complete *F*CKING* idiot
2) Bobby Max in disguise
3) A really good troll, making fun of *CORVIS*
routethus 12/4/2012 | 11:11:09 PM
re: Cisco's Billion Dollar Plays aspicer,

snip:
+ I think Cisco made money the old fashioned way.

I respect your right to comment on Juniper's cartoons, but pleeeezzzz, this is no fair maiden you are defending. They are more than big boys over at Cisco, they can take this and much more. They can give it too, even if they don't do it in such a public way.
lr_monger 12/4/2012 | 11:11:08 PM
re: Cisco's Billion Dollar Plays Looks like typing "7500" into Google also results in getting Juniper product results. Seems Google at its best, Juniper too.
fc_nas 12/4/2012 | 11:11:07 PM
re: Cisco's Billion Dollar Plays They stumbled first time in storage, better luck next time.

I would be hardly surprised if they don't show up in storage radar the way things are going on with them. Looks like they will be spending all their meager revenues on R&D and pouring in extra money on pleasing customers. Probably they should stick to what they are good at, creating new technology than attacking storage market and being distant third.
BobbyMax 12/4/2012 | 11:11:06 PM
re: Cisco's Billion Dollar Plays Security
Networked homes
IP telephony
Optical networking
Wireless LANs
Storage

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. All of its products have grown too old and they are NOT NEXT GENERATION PRODUCTS. One of its products, Catalyst, is about 8 years old butCisco keeps selling as the most recent product. It does the same thing with respect to other products.

Mr. Chambers is totally wrong, that the products in the following technology areas: Security, networked homes, IP telephony, Optical networking will yield 6 Billion dollars in revenue by the year 2006. Mr. Chambers must be dreaming. This again is unproven information and he is saying that as a part of marketing propoganda.

Many companies have lost almost 80% of their market valuation from what it used to be. I do not see many companies will have enough profit to buy thhe equipment which Cisco is attempting to promote based on false assumptions. Which companies Cisco is thinking of acquiring.

Juniper has not said anything unusual about Cisco. The compa\nies have the right and responsibility to talk about its competitors products and any other information that needs to be discussed.

Wireless LANs
Storage
change_is_good 12/4/2012 | 11:11:05 PM
re: Cisco's Billion Dollar Plays fw23: all your base are belong to juniper.

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