Cisco Systems comes out of the server room
We’ll send you a myFT Daily Digest email rounding up the latest US & Canadian companies news every morning.
Cisco Systems may be Silicon Valley’s biggest company by market capitalisation but for years its products - and brand name - have been largely relegated to server rooms and corporate data centres tucked away from the public eye.
Now that has begun to change. Cisco, says one executive, is coming out of the closet.
“We’re doing more than just developing the IP network; we’re creating services that enable new applications on the networks,” says Charlie Giancarlo, Cisco’s chief development officer. “The big change for Cisco is the focus on the end-user experience.”
Last year Cisco signalled its intention to carve out a niche in digital television with the $6.9bn purchase of Scientific Atlanta, a maker of set-top cable television boxes.
It recently launched TelePresence, a high-end video conferencing system designed to make people sitting in rooms thousands of miles apart feel like they are meeting face-to-face.
Cisco is now a top provider of voice technologies to businesses - from IP telephony to call centres and conferencing systems run over IP networks.
John Chambers, the soft-spoken West Virginian who has led the company from $10bn in market cap when he was appointed chief executive in 1995 to more than $165bn today, says these and other services represent the next step in the evolution of data networks.
The network of the future, he says, will no longer be merely a conduit for information; instead, it will offer services that allow businesses and private users to make the best use of increasing amounts of data.
Data service providers, he says, “will be experience providers, not plumbers.” In the home, Cisco hopes to partner with content providers to capitalise on a shift in demand towards services that allow viewers to access content at a time and place of their choosing.
Inside businesses, the company is also trying to position itself at the centre of the so-called “quad play” of combining data, video, voice and mobility services into a single network.
Cisco expects to benefit not just from growth in these new customer-facing services but from upgrades to networking infrastructure driven by these services’ increasing bandwith requirements.
“You just watch what has occured with YouTube,” Mr Chambers told industry analysts and shareholders on Tuesday at the company’s annual analyst meeting, “which is what I would call baby steps in terms of loads on networks.”
A single session on Cisco’s new video conferencing service, for example, requires 100 times the bandwidth of a normal voice call.
“As enterprises deploy [TelePresence] around their offices to have face-to-face meetings, it will drive upgrades to networks like nothing before,” says Marthin De Beer, head of Cisco’s emerging technologies group.
Mr De Beer says IT executives are scrambling to deploy new technologies that streamline business processes and contruibute directly to their companies’ bottom lines.
“These are things [chief information officers] care about,” he says. “They’re not saying ‘can you get me a [return on investment] on the upgrade: they’re saying ‘we clearly need this’.”
Wall Street seems to share Cisco’s enthusiasm about the future. The company’s stock price has risen more than 50 per cent over the past three months.
“Cisco is an execution machine,” says Bert Hochfeld, an analyst at Hochfeld Independent Research. “If there is a company of its size that’s as nimble or executes half as well, nobody has directed it to my attention.”
Revenues in Cisco’s “advanced technologies” business, the technologies that form the vanguard of its attempt to change the face of networking over the next five years, grew more than 20 per cent last quarter. Cisco’s core business in switches and routers posted double-digit growth.
The challenge now, executives say, is to turn Cisco into a brand that appeals to end-users, whether they are consumers looking for a way to beam high-definition television content around their home or managers looking for a better way to share company data with their sales teams.
Cisco exceutives say they hope to draw on customer-facing experience inside divisions like Scientific Atlanta and Linksys, the company’s consumer wireless router business, to make it work.
Last month, Cisco agreed to pay $120m to re-name the Oalkand A’s new baseball stadium Cisco Field - another step towards bringing the Cisco brand out of the server room.