Monday, April 01, 2013

Is Chamber’s India bet going to Pay Out?

Even as Low Cost Competitors begin Gnawing at its heels, Cisco is Already taking its Business to Multiple new Directions. But is it going too far, too fast?

Over four years ago, Cisco’s Chairman & CEO John Chambers sent Wim Elfrienk, Chief Globalisation Officer and also Executive VP for Cisco Services to Bangalore. Wim had a very specific agenda in terms of taking Cisco’s India relationship much further.

Normally, there are a limited number of oft cited and clichéd ways in which MNCs attempt to do that nowadays, but Wim’s assignment was indeed special. He was to built a second headquarters for Cisco at Bangalore. This centre was supposed to mirror every function of the main corporate office at San Jose including, marketing, HR, R&D, services, finance, et al, and be the platform for its expansion into emerging markets. One particular rationale for choosing Bangalore is interesting. Cisco believes that most of its growth in the future will come from markets in Eastern Europe, far east, South East Asia, India, China and Middle East. And Cisco’s current and potential customers are courteously welcomed to the centre (which is within a 6 hour flight away from all these locations) to witness the newest technology applications that Cisco is bringing in as it strives to leverage its ‘network as a platform’ concept to build solutions with a strong push towards collaboration, data centre virtualisation and video. These are immensely transformative changes for a company that was traditionally just a networking leader, and seeks a new future. To understand the rationale, fine print and likely outcome of these changes, we need to do a brief review of Cisco’s performance.

Miles away in San Jose, Chambers, who took the lead in moving Cisco from being the plumber of the Internet to the platform, has reasons to cheer, as the company is back on the growth path after the recessionary blip. After a fall in revenues by 8.6% yoy to $36.12 billion in the financial year ending July 2009, the company saw a growth of 10.8% yoy in the last fiscal to close with revenues of $40.04 billion. For the quarter ending January 29, 2011, net sales amounted to $10.4 billion, a growth of 6% yoy. On the other hand, there was some disappointment on the margin front, as Cisco reported a fall of 17.9% yoy in non-GAAP income, which was reported at $1.5 billion for the quarter. The consumer business posted a decline of 15% yoy. Besides, it was notable to see a fall of 7% yoy in switch revenue. Although this was said to be related to new product launches taking time to gain traction, backlogs, et al, the company’s performance has been a matter of concern. Post the acquisition of 3Com, HP is giving some trouble to Cisco in this segment when it comes to margins.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles

 
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