Cisco Systems Inc. isn't content to be the world's largest maker of
computer networking gear. It says it wants to become the "No. 1"
supplier of information technology to big businesses by broadening its
offerings of services and software.
But when Cisco says "No. 1 IT
company," it doesn't mean that it's going to be the biggest-selling
company. That goal is out of reach, as IBM Corp.'s revenue is twice that
Rather, Cisco CEO John Chambers says he wants the
company to loom largest in the minds of its customers and to be the one
setting the pace in the industry. Being No. 1, he says, means having the
best customer satisfaction and the best profit margins for products.
strategy statement, articulated Friday at a presentation for Wall
Street analysts, follows some lean years that have seen Cisco retrench
from even broader goals, which included trying to establish itself as a
consumer brand and buying a maker of camcorders. The new direction will
be supported by a global advertising campaign with the slogan "Tomorrow
starts here." The ad campaign starts Monday.
"The play sounds a
lot like the IBM story," Raymond James analyst Simon Leopold said. After
the maker of mainframe computers struggled in the 1980s with the rise
of cheap microprocessors and rapid changes in the industry, IBM
successfully transformed itself into a company that combined consulting
services, software and hardware.
For Cisco, the new playbook comes
as Chambers, who is 63 and one of the longest-serving CEOs in Silicon
Valley, is nearing retirement and looking to hand over to a successor in
two to four years. There are two chief candidates, who appeared with
Chambers on Friday: Rob Lloyd, the head of sales and product
development, and Gary Moore, the chief operating officer.
Rob and I are prepared to be the CEO," Moore said, adding that whoever
wasn't chosen would accept the board's decision and remain with the
Chambers told analysts that Cisco pulls in about $6
billion from software per year and plans to double that in the next
three to five years. That's not a figure the company usually breaks out,
as most of its software is deeply integrated into hardware such as
routers and switches, which shunt data through networks.
at the meeting were unsure how to incorporate the figure into their
models, and the company didn't give a lot of specifics on how it hoped
to achieve that.
Analysts also questioned how Cisco hopes to be
the top player when it doesn't sell the massive storage arrays that big
companies need for their data. Chambers said Cisco will keep partnering
with companies that do sell storage products, including IBM and EMC
Apart from IBM, Cisco's chief competitors for the "No. 1 IT"
throne are Microsoft Corp., Oracle Corp., SAG AG and Hewlett-Packard
Co. Cisco partners closely with them, except for HP.
the company is sticking to its forecast of growing sales by 5 percent
to 7 percent per year and its earnings slightly faster, at 7 percent to 9
percent per year. Both figures represent pullbacks from the past two
decades, when the San Jose, Calif., company often grew sales by more
than 10 percent per year.
Cisco's stock fell 15 cents, or 0.7 percent, to close Friday at $19.33.