Cisco designs, manufactures and sells Internet Protocol (IP)-based networking and other products related to the communications and information technology industry and provides services associated with these products and there use. Their product portfolio consists of a broad line of products for transporting data, voice, and video within buildings, across campuses, and around the world.
Cisco was founded in 1984 by a group of computer scientists from Stanford University.Cisco was incorporated on December 10, 1984 in California.At the end of Q2 FY2011 (ending January 29, 2011) Cisco has 72,935 employees Surpassed 39 billion in revenue in 2008Corporate headquarters located in San Jose, California32 factories worldwide, 30 of them are outsourced.Spends nearly $5.3 billion a year in R&D, making us one of the top R&D spenders in the world.
Video Easier to Create, Consume, Search and Share Across the EnterpriseCisco Demonstrates Leadership in Virtualized, Scalable, Cloud- Ready Data Centers with Customer and Technology MilestonesShipped its one millionth Nexus 10Gb Ethernet portReached nearly 4,000 customers, 1,000 being repeat buyersCisco's Unified Computing System revenue grew more than 700%Cisco Connects Businesses to Consumers via VideoAugment in-person meetings and interactions with lifelike video experiencesHD recording and sharing on FaceBook, Flipshare and You Tube
More Speaking Here
Fiscal 2010 was a defining year for Cisco following the unprecedented global economic challenges of the year before. This was our opportunity to show the world what a truly great company we are, and to position ourselves to extend our leadership in the years ahead. — John Chambers, Chairman & CEO
In fiscal 2010, Cisco reported record net sales of over $40 billion, an increase of 11% compared to a year ago. Annual product sales were $32.4 billion, up 11% year-over-year. Service revenue represented 19% of annual sales or $7.6 billion, up 9% from a year ago. Sales across all of our geographic theaters increased when compared to fiscal 2009. We attribute this increase to an improvement in overall demand derived from a gradually recovering global economy as well as, in our view, increased demand for the architectural approach to products and services that only Cisco can offer.
Cisco has a robust balance sheet. The company features significant cash and cash equivalents and investments of 39.861 billion. Its investments, which are primarily short term in nature, stood at 35.280 billion, compared to last years 29.283 billion.
Because of the amount of cash that Cisco holds on to it has inflated our “T” value which causes our index to decrease.
Beg: Amanda Sales long term trend (5 years).http://investor.cisco.com/results.cfm
AmandaSales by long term (5 years) broken down into quarters… shows growth and decline throughout the years.
Amanda Sales by quarters continued
AmandaSales by SBU. What SBU is. Q1 and 2 of 2011http://investor.cisco.com/results.cfmStrategic Management pg. 148
Amanda Market Share of stoves vs. industry and competitors (averages over the past 5 years).http://investor.cisco.com/results.cfmTalked to a cisco representative and they do not compute their market share, but other companies do it for them occasionally. This is market share of stocks
AmandaCompensation. Cisco representative said they don’t give out exact amounts, but this is how they decided to compensate top management for the 2010-2011 years. www.materials.proxyvote.com/cisco/2010/proxystatement
Chambers - Salary of $382,212, the San Jose company said in a regulatory filing last week. He was awarded stock options valued at $5.69 million and got $4.6 million under the nonequity incentive plan
Amanda Direction of top management team, asked maddocks where to get info from.
-$132 million which translates to -9% where Alcatel-Lucent has gained 8%
Switches join multiple computers together to create a LAN or WAN.
Extend the working life of capital assetsAvoid or defer construction of new facilities
Contributing $10 million of product, services and supportCare-at-a-distance technology that combines video, audio and medical informationThe cameras and electronic scopes will enable patients to see and listen to the medical exam in the same manner as the clinician, according to CiscoEnables members of a patient’s care team–primary care provider, specialist physicians, care manager, family members and others–to meet, regardless of location or distance, said the company.
The company’s robust balance sheet enhances its investors’ confidence as well as allows it to investin the future growth avenues.
Electricity outages cost U.S. industry about $50 billion per year.Reduce U.S. greenhouse gas emissions equivalent to 60 to 211 million metric tons of CO2 annually in 2030.Generate approximately 280,000 direct jobs across various categories.Obama administration has also increased the maximum award available through ARRA's Smart Grid Investment Grant Programfrom $20 million to $200 million, and the Smart Grid Demonstration Projects from $40 million to $100 million. A power network utilizing present computing technologies will eliminate blackouts and brownouts due to under-capacity, and will enable better overall reliability through advanced monitoring and management.
Regulatory - Operations. Efficiency measures that impact new or existing buildings, changes that impact assets that are direct emitters (e.g., vehicle fleet, diesel generators), and changes that would impact the price of energy (fuels and electricity).Cisco sees a limited risk from increasing operational costs caused by stricter building codes or increasing electricity, fuel and transportation costs. Cisco is not a heavy emitter of greenhouse gases and is therefore less sensitive to changes in regulations than carbon-intensive industries.Physical – Impact could be actual labor availability or political instability caused by or attributed to climate changeGeneral - Market and brand risks are probably the biggest and most clearly defined risks specifically because Cisco has positively differentiated itself with respect to climate change and operational, product and solutions activities to reduce GHG emissions.To address risks associated with regulations on fuel/energy taxes, Cisco has developed an Energy Management department to continually track and monitor Cisco’s global energy consumption and associated GHG emissions. This department also is charged with identifying, evaluating and implementing projects to improve the efficiency of Cisco’s operations and minimize Cisco’s carbon footprint.
Data – All information about Cisco is confidential and is not for their use.Ethics – We follow the law, No bribes, avoid conflict of interest, avoid unfair business practices, anti-corruption, avoid political and charitable contributions on Cisco’s behalf and unauthorized lobbying.Health and Safety – Regulatory compliance, Hazard ID and risk mitigation, documentation and inspection, suppliers must implement control measures to ensure environmental protection.
Cisco Case Analysis
Cisco Systems Inc.<br />
Part One: Introduction and External Analysis<br />
Cisco Systems - Introduction<br /><ul><li>Founded in 1984
Corporate headquarters located in San Jose, California
32 factories worldwide, 30 of them are outsourced.
Spends nearly $5.3 billion a year in R&D</li></li></ul><li>Cisco Systems – Intro – Recent Events<br /><ul><li>Video Easier to Create, Consume, Search and Share Across the Enterprise
Cisco Demonstrates Leadership in Virtualized, Scalable, Cloud- Ready Data Centers with Customer and Technology Milestones
Cisco Connects Businesses to Consumers via Video</li></li></ul><li>Networking and Communication<br /><ul><li>Industry: Networking and Communication supplies and services
Industry Consolidation – Few competitors in their main product area
In 2006 they had 70% of the share of its core router and switch market.</li></ul>Juniper Networks and Hewlitt-Packard selected as benchmarks.<br />Cisco's Chambers Problem<br />Cisco Competition<br />
Cisco’s Mission Statement<br />Shape the future of the Internet by creating unprecedented<br />value and opportunity for our customers, employees, investors,<br />and ecosystem partners.<br />Vision<br />Changing the Way We Work, Live, Play, and Learn.<br />Cisco has a very bland and basic mission statement that only ranks as an “ok” (5) on the MVV evaluation.<br />
Index of Sustainable Growth<br />g* = [P(1-D)(1+L)] / [T-P(1-D)(1+L)], where<br />P = (Net Profit before Tax / Net Sales) x 100<br />D = Target dividends / Profit after Tax<br />L = Total Liabilities / Net Worth<br />T = (Total Assets / Net Sales) x 100<br />
Credit Ratings<br />March 9, 2011-Standard & Poor's Ratings Services said today that it assigned its 'A+' issue rating to San Jose, Calif.-based Cisco Systems Inc.'s (Cisco) three tranches of senior unsecured notes.<br />
Financial success Statement<br />In fiscal 2010, we saw a solid return to balanced growth across geographies, product and customer markets exemplified by Cisco reaching over $40 billion in fiscal year revenue. We focused our efforts on defining true innovation and operational excellence within our company. And we improved our position as a strategic partner to customers worldwide by showing how the network has become, in our view, the most strategic asset in communications and information technology (IT) today.<br />
Sales by strategic business units in quarter 1 and 2 of 2011<br /><ul><li>Strategic Business Units = divisions or groups of divisions composed of independent product-market segments that are given primary responsibility and authority for the management of their own functional areas. </li></ul>CISCO<br />Q1 IN MILLIONS Q2 IN MILLIONS<br />ROUTERS - $1,835 ROUTERS - $1,672<br />SWITCHES - $3,532 SWITCHES - $3,151<br />NEW PRODUCTS - $3,104 NEW PRODUCTS - $3,202<br />OTHER PRODUCTS - $229 OTHER PRODUCTS - $211<br />TOTAL PRODUCT – $8,700 TOTAL PRODUCT - $8,236<br />
Marketing Tactics<br /><ul><li>Tactics = specific operating plans that detail how a strategy is to be implemented in terms of when and where it is to be put into action.
Timing Tactics </li></ul> Historically a first mover supported by being a first mover in technology. They specialize in routers, switches, wireless, security, optical networking, etc. Cisco is also considered a industry leader.<br /><ul><li>Market Location Tactics: Offensive</li></ul> Cisco has always been known to take a frontal assault because they are a market leader. They go head to head with its competition.<br />
Marketing Tactics<br /><ul><li>Market Location Tactics: Defensive</li></ul> Cisco takes the path of raising structural barriers. They do this to block challenger’s logical avenues of attack.<br /> Some factors of Porters they use are:<br /> Offering a full line of products in every profitable market segment to close off any entry points.<br /> Keep their items reasonably priced for their most popular products and services. <br />
Cisco Success statement<br /><ul><li>Cisco has had many success stories throughout the years which is a large part in being a industry leader.
Customers drive our business strategies to achieving success and excellence in everything we do, and will continue to be our key focus for developing products and services that accelerate their capability to prosper in the Internet business.</li></li></ul><li>Cisco success statement cont. <br /><ul><li>An example of a success story is:</li></ul> In 2001 the cost of direct DSL and ISDN access increased markedly. Cisco transitioned tens of thousands of teleworkers and remote office workers worldwide to remote access VPNs. To determine if additional capacity was needed, Cisco used Cisco NetFlow in conjunction with various open-source tools to characterize existing traffic and then extrapolate expected traffic. With this business intelligence, Cisco successfully transitioned 22,000 users to VPN in only three months. <br />
Marketing problems<br /><ul><li>The dominance in network switches that Cisco holds is waning.
Hewlett-Packard has been particularly aggressive in the switching market since they have entered.
Cisco’s video-conferencing system for living rooms has been a strange product to market.
There is little market for such a product when consumers can video chat for free over the internet instead of paying $600 for the equipment and a $25 a month service fee. </li></li></ul><li>Analysis of Management Position<br />
Corporate management team<br /><ul><li>Frank A. Calderoni</li></ul> Executive Vice President, Chief Financial Officer<br /><ul><li>John T. Chambers</li></ul> Chairman and Chief Executive Officer<br /><ul><li>Mark Chandler</li></ul> Senior Vice President, Legal Services, General Counsel and Secretary <br /><ul><li>Blair Christie</li></ul> Chief Marketing Officer, Worldwide Government Affairs, Corporate Communications<br /><ul><li>WimElfink</li></ul> Executive Vice President, Cisco Services and Chief Globalization Officer<br />
Corporate management team cont. <br /><ul><li>Robert W. Lloyd</li></ul> Executive Vice President, Worldwide Operations<br /><ul><li>Gary B. Moore</li></ul> Executive Vice President, Chief Operating Officer<br /><ul><li>Randy Pond</li></ul> Executive Vice President, Operations, Processes and Systems<br />
Executive compensation <br /><ul><li>Compensation Governance. The core of Cisco’s executive compensation continues to be pay for performance, and the framework includes the compensation governance features discussed below:</li></ul>Provides shareholders with the opportunity to cast advisory votes on compensation<br />Have no employment or severance agreements, special benefits, supplemental executive retirement plans, perquisites, or tax equalization.<br />CEO compensated below targets and median of the peer group of three out of the last five years.<br />Compensation Committee is solely independent directors.<br />
Top Five – 2010 Compensation & Tenure<br />John Chambers – $18.9 million in 2010<br />
Direction of top management team<br /><ul><li>Continue to seek to expand share of Cisco’s customers’ information technology spending.
Focus on core networking capabilities while expanding into product markets where the network as a platform is increasing.
Focusing primary attention include those related to the increased role of virtualization/the cloud, video, collaboration, and networked Web 2.0 technologies. </li></li></ul><li>Top Management Performance Indicators<br />Qualitative Factors<br />Quantitative Factors<br />Strategic Direction (4)<br />Implementing Strategy (5)<br />Building Mgt. Team (4)<br />Management Qual. (5)<br />Succession (4)<br />Labor Relations (4)<br />Technology Leader (5)<br />Board Relations (4)<br />Investor Relations (5)<br />Com./GovRel’ns(4)<br />Return on Assets (5)<br />Return on Investment (4)<br />Return on Equity (4)<br />Return Meas. Trends (4)<br />Cash Flow (4)<br />Profit Growth (4)<br />EPS (4)<br />Dividend Payout (4)<br />Stock Price (4)<br />Total Return to SH (1)<br />Total = 44<br />Total = 38<br />
Management Analysis<br /><ul><li>Chambers recently introduced collaborative decision making. 70% of decisions made by groups.
20% of senior leaders have left since the switch
5 Critical Performance Indicators</li></li></ul><li>Current Core Competencies<br />Hardware product development<br />Acquisitions - “Buy-the-startups” (Cisco's acquisition strategy is best-in-world and we particularly look for acquisitions that capitalize on market disruption through new technologies and new business models.)<br />Collaboration Services<br />Network Flexibility/Scaling (data center/hardware/software capacities) and virtualization<br />Strategic Alliances (AT&T, Dell, HP, Intel, IBM, Microsoft, Nokia, etc…)<br />
Distinctive Competencies<br />Acquisitions<br />Smart-grid technology (form of routing or switching) as noted by CEO John Chambers.<br />
Current Long-term Corporate Strategies<br />Strategy: One Cisco<br /><ul><li>Grow faster than the market
Innovate</li></li></ul><li>Current Short-term Corporate strategies<br />Internal innovation - $5.3B+ spent on R&D annually<br />Acquisition – continued integration of Pari Networks, Inlet technologies, and newScale, Inc.<br />Enter into new markets:<br /><ul><li> Media solutions
Improve application velocity and enhance collaboration while reducing branch IT operational expenses by up to 70 percent</li></li></ul><li>Collaboration Group<br /><ul><li>Webex and TelePresence and other VoIP technologies
90 percent of frequent users save at least two hours of work time per week through video collaboration
It is possible to achieve 100% ROI in 5 years and payback periods of 21-40 months
Reduction of 21 percent in corporate travel spending</li></li></ul><li>
http://www.theflip.com/en-us/products/design-your-own.aspx</li></li></ul><li>Long-Term Success – Smart Grid<br /><ul><li>49% of cyber security threats to the electrical infrastructure initiate from breaches of physical security.
Cisco partnered with German electricity company Yello Strom to launch a smart-grid pilot project in 70 German homes and businesses.
Use end-of-life programs that reduce the overall impact of the environment
These end-of-life programs are designed to reuse or harvest the material commodities contained in the equipment collected and return those materials to the market where they are made into new products
Cisco believes purchasing products from small, women-owned, small disadvantaged, minority, disabled veteran, and HUBZone enterprises are key to the economic vitality of both Cisco and the community.</li></li></ul><li>5. Doing Enough?<br />Yes, we think they are doing enough because:<br /><ul><li>They have produced many programs that make them socially and ethically responsible.
Supplier certifications and environmental requirements.</li></li></ul><li>Are they Challenged?<br />"Are they challenged? Absolutely. But outside of Apple and Google, we don't see a company in the technology space that is as well positioned for growth.“<br />-Unknown<br />