Investing in theNew CollaborativeWorkspaceAmit MehraCountry ManagerCisco Capital-India
The global economy is in a dangerous newphase. Global activity has weakened andbecome more uneven, confidence has fallensharply recently, and downside risks aregrowing,” the IMF, World Economic Outlook
0 2 4 6 8 -8 -6 -4 -2 10 12 Australia Brazil China EURO Area Germany Greece India Ireland Italy Japan Mexico Slower Growth; Higher RiskWorld Economic Outlook 2010-2012 Netherlands Portugal South Africa Spain UK US 2012F 2011F 2010F
Sovereign Debt by Country (Est.) Country % of GDP Japan 195.80 Greece 144.00 Ireland 130.70 Italy 118.90 Euro 91.60 Portugal 88.90 France 86.70United Kingdom 81.30 United States 79.50 Spain 70.72 India 52.10 China 16.80 Russia 10.05
Highlights – United States Debt of $15.2T [$16.4T ceiling] Budget deficit revised to US$1.2T Unemployment 8.3% Housing continues to be weak
The Euro Crisis • Spain and Italy’s combined debt stands at Euros 2.5T • Euro zone looking for Growth! Vicious cycle of cuts, recession and more cuts! • Germany and France saw a sharp drop in factory activity in March 2012• Greece bailout, followed by Ireland and then Portugal• Spain announced that it will miss it’s financial targets as set for them
Impact on India - Is India decoupled? • Over 80-90% of the revenues of the IT & BPO sector comes from North America and Europe which are the worst affected in the current sovereign debt crisis. • Market shall remain volatile; Huge outflows expected from FI’s if Euro Crisis further deepens . • India’s high twin deficit of fiscal and current account is not only a threat to its growth, but has also reduced the ammunition that it has for facing a possible contraction of demand from foreign countries. • Many corporations have access to US$ loans thru the automatic ECB route and many have not hedged their forex exposure.
Impact on India – In addition… GDP growth for India was 6.1% in its recently-completed quarter, versus 6.9% in the r, and 7.7% in the prior quarters respectively. The country has experienced 7 consecutive quarters of manufacturing declines and business sentiment is low. The Central Bank has raised rates continuously for 20 months to control inflation and has been successful with inflation dropping to 6.6% recently versus 9% for most of 2011. Confused Market Signals: -Retail sector – Announcement and Reversal. -Cancellation of mobile spectrum licenses in February;. -General inability to pass tax reform and confront vested interests is hurting investor confidence. 6% growth rates are good, but probably lower than India needs in the long run to remain financially stable.
Cisco Capital A World-Class Financial Services Organization Countries where we offer Billion in assets End User Financing Countries with Employees Channel Financing Countries offering Since Cisco Certified the leading provider of Refurbished Equipment financing for all Cisco solutionsMission: Enabling profitable growth through innovative financing
Cisco Capital Growth in APJCEurope’s Economic Woes ⁾ ⁾⁾ US Slow Economic ⁾ ⁾⁾ China 7.5% Recovery Korea 3.7% India 6.1% ⁾ ⁾⁾ Japan (0.9%) Vietnam 5.9% Capital Growth Rates The Philippines 3.6% Region 2 Yr CAGR 3 Yr CAGR Malaysia 4.6% Thailand 0.1% APAC (Ex-India) 26% 18% Singapore 5.6% Greater China 42% 39% India 46% (3%) Indonesia 6.5% Japan 89% 40% APJC 46% 24% Australia 2.3%
What customers are telling Cisco Capital 77% Say the availability of financing was critical in choosing their technology partner
What customers are telling Cisco Capital 77% Rely on leasing to protect against obsolescence and establish a discipline for equipment replacement (lifecycle management)
What customers are telling Cisco Capital 74% Lease as a way to free up capital
Companies are increasingly using financing toachieve their technology & financial objectives Protect Convert Immediate Cash Against Preservation CapEx Budget Obsolescence To OpEx Creation of Australian firms are of Indian firms intend to of Chinese firms inclined to finance IT utilize financing for evaluate financing in the technology acquisition early stages of the Sales over the next 12 months Cycle
The impact of uncertainty on theinvestment decisionMACROECONOMIC FINANCE DEPT. BUT …YOURfactors globally cloud making investment COMPETITION the investment approvals more doesn’t sleep, so decision difficult to obtain investing in Collaboration technology is not really ‘optional’
Sources of funds for Cisco CollaborationTechnology InvestmentInternally – Local/Regional Independent Other Cisco Capital generated & Global Banks Financiers/ Vendor (Cash) Lessors Financiers
Vendor-financed investment is a goodway forward How industrial companies should prepare for the end of cheap capital Identify suppliers who can also provide funding. Don’t forget the potential of your suppliers—some of whom have access to domestic savings pools in certain countries—to be a source of capital. Source: McKinsey Quarterly, How the growth of emerging markets will strain global finance
Upfront cash outlay versus a periodic payment for your New Collaborative Workspace Use ForCollaboration IllustrationPlus or CUWL purposesBundle Promo List Price/Financing only Scenarioto enjoy more Amount (US$) discounts! The New Collaborative Workspace for 250 employees – Call Control, Endpoints 255,800 & Infrastructure Principal: $255,800 Korea Interest: $19,600 (CapEx) Total: $275,400 Principal: $255,800 Korea $6,860 Month 1 $6,860 Month 12 Month 24 $6,860 Month 36 Interest: ($8,840) (OpEx) $6,860 Total: $246,960* Estimates based on current financing rates, customer credit rating, lease tenor & BOM components. Actual monthly payment will be quoted on a case by case basis.
Utilize Cisco Capital to ReapMaximum ReturnsLimited CapEx budgets,general affordability issues, • High residual value operating leasesand lifecycle equipmentacquisition strategyLimited budgets, but desire • Loans & Finance leasesfor equipment ownershipCFO reluctance to pre-pay forrequired Collaboration • 0% Financing for multi-year servicesservicesTiming of budget availability • Payment deferrals and structures that match yourfor investment business objectivesService Provider milestonepayment requirements for • Progress Payments for Collaboration solutionsmulti-site Collaboration financing offer(Cisco UC & TP solutions).solution deployments
Cisco Capital Solution Offerings Finance Leases A capital lease or hire purchase that allows you to combine some of the advantages of leasing with ownership benefits. Operating Leases A projected residual value is deducted upfront from solution cost, lowering monthly repayments and total deployment costs. Flexibility to extend, purchase, return or upgrade at the end of the initial term. Cisco Multi-Year Services Interest-free financing for 24-60 months with minimum of US$50K net per annum for eligible services in most APAC countries. Expires: July 30, 2012 Progress Payments Cisco UC and TP solutions with NO finance charges for up to 120 days with minimum order value of US$50K in most APAC countries. Expires: July 30, 2012 Payment Deferral 6-month deferral payment offer on all Cisco technologies with 36 and 48 month lease terms available in most APAC countries. Expires: July 30, 2012