Network equipment suppliers are taking drastic steps, including taking themselves private, in order to survive. Amidst all the devastation, market Behemoth Cisco just keeps rolling along, exceeding revenue expectations quarter after quarter.Earlier this month, the network equipment giant announced its first quarter revenue. Net revenue was up 17% to $9.6 billion and profits increased 37% to $2.2 billion. This came on the heels of a 23% increase in revenue in fiscal 2007. Very nice numbers.
Clearly, the company is doing something right, especially since many of its competitors are stumbling badly. So why the discrepancy? Competitors point to Ciscos size as one of the reasons why it fares so well, and there is some merit to that point. Cisco is more than three times bigger than Nortel and almost ten times larger than Juniper Networks. While Hewlett-Packard has the sheer size to compete with Cisco, its primary focus is on computers rather than networking products.
One other component is Cisco has done a good job recognizing emerging markets. In fiscal 2007, revenue from its acquisition of Scientific-Atlanta in 2005 provided a big boost. In 2006, that acquisition contributed $989 million to the bottom line while in 2007, that number skyrocketed to $2.8 billion. Cisco correctly read the shift to IPTV services. In addition, the network equipment provider was able to assimilate Scientific Atlanta into its core business and make the acquisition work. Through the years, that has been a company hallmark. In fact, Cisco has purchased more than 125 companies since 1993 including a dozen this year and in many cases been able to integrate the new technology into core business.
So as the companys growth continues, the question arises: who can give Cisco a run for its money? As the moment, the answer is no one. That leads to the follow up question: Is Ciscos dominance good for the industry? That depends on your point of view. On the plus side, small and medium businesses can find a vendor able to deliver all of their needed networking products and one that a customer will be assured will be around in a few years to support them. The downside is Ciscos products often come with high prices tags, so customers pay a premium for the brand. Judging from the companys fiscal performance, that is a something that many companies are now willing to pay
How heavily do you rely on Cisco for your networking needs? What has your experience been with the company? Does the lack of market competition concern you?
