Cisco details partners strategy for outlasting slump

Despite seeing its stock price tumble this year, Cisco Systems Inc. officials say they are optimistic for the beleaguered San Jose, Calif., titan's future and planning a tighter focus on business-to-business partnerships and a range of potentially lucrative new market sectors.

Cisco President and CEO John Chambers said that Cisco and its partners must work harder to deliver a better return on investment, or "payback applications," to their customers.

"There's a focus on ... profitability like I've not seen during my business career," Chambers said last week at the annual Cisco Partner Summit. "Customers are saying, 'I want to focus on looking out two or three years, but my job depends on improving in the next 12 to 18 months as well.'"In the near future, Chambers expects Cisco's partners -- not its internal sales force -- to account for the majority of the company's sales, distribution, and support.

Chambers even insisted that the downturn could actually help the company. "Where you grow market share is always during the tough transitions," he said. "It's difficult to break away during normal times, but during tough times, you can do it."

Cisco also announced its plans to pursue four emerging markets: VOIP (voice over IP), wireless LANs, content networking, and streaming media.

VOIP clearly tops Cisco's list of new playing fields. Many analysts have commented on the company's promising prospects in the VOIP market. Last month, Cisco officials detailed plans to deploy an IP infrastructure that would enable applications such as custom-built XML utilities, unified messaging, voice recognition, and broadband voice.

Cisco's wireless LAN play will be aimed not only at mobile workers but also at sectors such as health care and education, according to Mike Volpi, Cisco's chief strategy officer. Volpi further claimed that Cisco's wireless LAN efforts will complement, rather than compete, with 2.5G technology, because the company expects end-users to demand faster wireless speeds in their offices and homes than they will on the road.

Although current demand for wireless LAN services is limited, Scottsdale, Ariz.-based research firm Cahners In-Stat Group has reported the market will grow from US$1.2 billion in 2001 to US$2.7 billion in two years.

Cisco also plans to move aggressively into the content networking arena where it is currently battling rivals such as Nortel Networks, Inktomi, and Akamai Technologies. Suggesting a new direction in the way content networking is implemented, Volpi pointed out that Cisco's play will extend beyond the service provider market. "More than half of our CDNs [Content Delivery Network platforms] are deployed by enterprises for specific applications, like e-learning or customer relationship management," he said.

The content networking market appears to be primed for an explosion. Internet Research Group, a Los Altos, Calif.-based think tank, predicts the industry will balloon in size from a US$1 billion market today to US$6 billion by 2004.

Cisco eyes key markets (Source: CISCO)

The company moves ahead on several fronts.

VOIP: Deploy infrastructure to enable third-party, XML-based application development.

Wireless LAN: Continue efforts to develop 11Mbps wireless platform for mobile workers, health care, education, and remote kiosk markets.

Content networking: Target both enterprises and service providers using open standards.

Streaming media: Monitor industry developments for opportunities to decouple content providers from delivery vehicles.

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