I tend to look at things more through a technologists and reporters eyes rather than investors. On the first two, I am optimistic. I believe Cisco has the people and technology to succeed and that the cloud strategy will pay off. But it's going to be a long course. No 3-month or even 6-month fix
It's going to come down to wait and see. It's too early now to see the results of what Cisco is doing. Let's hope the company get it right otherwise the impact if it has to embark upon another reorganization would be more negative.
A slight tangent, but I also want to point out, it'll be interesting to watch in 2011 what HP does in networking, in that HP has a new CEO and also they're in the midst of rebranding their networking equipment, moving it out from under the HP Procurve brand into HP proper
Excellent point, Bolaji. It seems odd that Cisco hasn't capitalized on the expansion in the Far East. At the same time, they may be facing regulatory issues such as Huawei is fcing here, but I haven't heard anyhting like that...
Alex, There's a connection between the marketing issue raised by Steve and the problem of expanding in Asia. The company needs a much bigger turnaround program than Chambers is acknowledging. This may seem a stretch but the weight of its sales leans too much towards the West while Asia is also growing fast. With a marketing plan that understands all the challenges Cisco may be able to win also Asia-Pacific. Has the company admitted the challenge of Asia and how it might increase sales in the region?
I meant that the volumes aren't there for someone to peel that off as a sep biz. Cisco and Juniper do custom silicon for their switches etc. where the volumes make it economical, and then use ASICs around that where the volumes won't support a full custom part
Ah, good point Anna. And we haven't talked abt the semiconductor angle of networking, which is interesting but hasn't risen to the fore cause there's no economics there to make a biz out of it . (did you know that Intel has done internal stuff where you can build routers out of x86 blocks?)
You cannot win anymore solely because you've got great hardware. By the way, I see many articles focused on software on EBN, which tells me this is an increasingly important area for all companies. Even in the semiconductor area suppliers are offering so-called system on a chip, another fancy way of saying we'll help integrate software into our products. Also, companies like Freescale are hiring not just design engineers but also software engineers.
Re router/switches not from foreign suppliers, that's a good point but in some sense wishful thinking that this will prevent back doors, which you don't have to be a conspiracy theorist to assume are already in there.
I have a few conjectures on this. The router/switches business is not one that many governments want to leave in the hands of foreign companies. When it can be avoided national governments encourage the participation of local businesses they feel they can trust or even control in such areas, hence the rapid growth of Huawei. To win in China, Cisco will have to evolve its national identity beyond being an American company. Even then it may not be completely trusted. That's a dilemma the company may not overcome.
lex: brilliant segue totalk about marketing. Did you know that Cisco has brought alot of their marketing inhouse? I think this is an absolutely huge mistake. They really need the benefit of third parties to endorese and qualify their claims and positioning.
Absolutely, Steve. But they also don't quite have the marketing rap down the way Cisco does. When I went to their big press conference over a yr ago, when Juniper announced they were getting on the NASDAQ, their big analogy was how this move was as momentus as the release of Abbey Road. Now, I love the Beatles, but...
Here are a few numbers related to Cisco's sales by region. In the first six months of its current fiscal year (ended Jan. 29) the company reported total sales of $21.57 billion. More than half of that ($11.4 billion) was from the United States and Canada; $4.1 billion was from Europe while Asia/Pacific, which included Japan represented only $3.2 billion. EMEA was even lower at $2.4 billion.
What this tells me is that whatever expansion is happening in Asia, Cisco is getting not as much of it as it is getting in North America and Europe. Who is winning these sales and how can Cisco get in on the action because on a longer-term basis it cannot afford to continue to be a local champion in North America and Europe. Most other companies in the hardware space are generating more of their sales from outside North America.
Steve -- (of the awesomely supportive DeusM suite) too true. Hardware companies must offset that with a supporting service offering. That is one aspect of Cico's business I am not familiar with--what types of ervice do they offer in suppoer of their hradware?
Juniper - now there's a story. They certainly have a HUGE Napoleon complex. I deal with them all the time whe i was CEO of light reading and my god you could really set their marekting people off by saying things like "when will juniper be considered an incumbent like Cisco"?
One other thing that interests me is Juniper, which has tried to articulate a broad vision, a la Cisco, but doesn't seem to be able to get the love from the press that Cisco does. So Juniper is more sotto voce..
we need to look ten years out and see where these trends take us... Cisco WAS a money machine. Now, less so. I sense a disaster on the horizon. It's desperately trying to reinvent itself but it's not taking.
To me, the one insoluable component of the equation is, how can Cisco maintain their status as what's effective the premier (high end, high margin) networking supplier in what Steve has rightly pointed out is a market that's commodity.
Hi Barbara (of the award winning EBN site!) - i hear you on the hardware stuff but the problem (and it is a hge problem) is that the margins are not there now. Cisco used toget away with charging $100,000 for one T3 router port, now you can get a gig for a $1000. There are vanishing margins in that line of business!!!!!!!
Certainly. Suppliers must be wondering by now what their fate would be. It's always disruptive to a company's manufacturing operation and you can bet many of Cisco's contract manufacturers would be desperate to know the details of the company's reorganization plans.
Alex, if I can take you up on the competitive landscape. Cisco is heavy in Europe and North America. A greater percentage of its sales come from these two regions and it is facing strong headwind in Asia, which is where the next wave of infrastructure spending will come from. Don't you see this as a problem longer-term?
One thing we haven't talked about is the competitive landscape re Cisco, and I think that's telling. Cisco does have a LARGE footprint, everyone else is just nipping at their heels. Except in servers, where Cisco is the new kid, nipping at HP and IBM
I hear you, Steve, but there is still a need for hardware and if you have the infrastructure for manufacturing, as Cisco has, you will still have a lot of room to grow. Look at all the competition out there already for the software/services standpoint--I think there will be a very rapid decline in population there. Hardware isn't something you can just up and do, some service offerings don't have that level of start-up cost
i think the impact of him leaving now would be worse than him staying but i also agree with Alex that he needs a bigger stronger bench. I mean, talk to any one in tech and ask them who they know at Cisco and they go "Chambers" then there's a long pause. Mike Volpi was good but he left (didn't he?)
Exactly, I believe the entire electronics market is prone to commoditization, including so-called high-end products. The danger is that many companies fail to realize this early enough. Cisco is not competing on the strength of its software but on the strength of the speed and resilience of its hardware. That's a long-term losing proposition. In today's world, businesses and consumers expect great hardware -- they take it as the basic foundation for products. It's the software, the interface that wins them away from one supplier to another.
Steve, if Cisco is successful in doing "cloud in a box," the will effectively straddle hardware and services, in that they will first sell hardware but then also offer tools to enable customers to get quickly into the cloud.So this might enable them to have an entree into services as their next big revenue stream.
the thing about cloud is that it is the ultimate commoditized service. also, the entire point of the cloud is that it doesn't matter who'se kit the services run over. Also, the money in cloud is in services, not infrastrcuture, and Cisco is still an infrastructure player
No, this is the real Hawk. If I can pursue Steve's question further, even the most powerful chairman/CEO does not determine his own compensation package. Cisco's compensation committee decided to award him the 2010 package despite the company's slide. And, also what credits or discredit should the board of directors receive in this case?
So they could fix all the decision-making bottlenecks--their most immediate issue, and the one which Chambers appears to be addressing--yet still be left w an earnings issue as far as Wall St. is concerned.
Getting back to Steve's point about Chambers, and also what Hawk (not Hawk from Spenser?) writes, I find it a real lapse that he, while he has a very deep exec bench, he's done a Steve Jobs, not grooming a next chairman. And I agree w Hawk abt the finger pointing, cause the biggest lapse--the councils--was Chambers' idea.
I was wondering also about the executive package too. Also, in the letter written by Chambers, which Alex referenced in his article, it seemed he pointed all his fingers in every direction but towards himself. Doesn't a chairman and CEO deserve some blame for the situation at his company?
Barbara, pulling the plug on Flip will hurt Chambers' goal of building Cisco's name w the general public -- he wants to do what Andy Grove did with Intel in the 1990s. w those "ba-bum-bum-bump" commercials.
I would like to start the discussion with perhaps the question on everyone's mind. In your opinion, how much trouble, if any is Cisco in or is the company's current situation being blown out of proportion?
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.