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Sunday, December 12, 2004


(Via News.com). Cisco having grown from start-up to industry behemoth over the past two decades, the company claimed it was once again proving its technological prowess while laying a foundation for the next 20 years. Marketing hype? No doubt. But, as Cisco celebrates its 20th anniversary on Friday, the release of its Core Router Series-1 highlights important changes at the world's largest networking gear maker as it casts around for new growth opportunities.First, the box appears to be the real deal. It's winning customers and has closed the technology gap with rival Juniper Networks, which for the past two years has steadily eaten away at Cisco's share of the core router market. More broadly, the CRS-1 points to the re-ascension of nuts-and-bolts engineering in a company that over time had increasingly given precedence to financial, sales and marketing tactics over technology innovation.
"I think the company has gone through multiple transitions throughout the years," said Mike Volpi, vice president and general manager of Cisco's routing group, who has been with the company since 1994. "In the early days, we prevailed because of the engineering, and while we've always maintained a good balance between marketing and engineering, I feel today we are getting back to our technology roots. There's a lot of innovative spirit within Cisco now."What's new: On its 20th birthday, Cisco Systems looks ready to rebound after a rough couple of years that have hurt its dominance in key markets. . With long-term telecommunications prospects rebounding, now's the time to re-establish itself. At 20, Cisco stands as a paragon of entrepreneurial success, growing out of a living room into a global dynamo with thousands of employees and billions of dollars in annual revenues. Its founders and employees have been rewarded with vast personal fortunes built on stock options, spurring deep loyalty among insiders.But, much like Hewlett-Packard, Apple Computer and other Silicon Valley icons, the company now stands at a crossroads, arrived at in large part by its tremendous achievements.The company's fortunes soared in the 1990s on the back of the Internet rocket, only to come back to Earth when the telecommunications boom ran out of fuel. Suddenly, demand for its key lines of corporate networking routers and switches slackened, destroying an aura of invincibility produced by years of 90-percent-plus dominance in its most critical markets.
Cisco has emerged from the boom and bust with a more sober outlook on its future, even as the long-term prospects for telecommunications and network spending appear to be on the rebound.To chase new growth, however, Cisco has been progressively forced to forage outside the corporate networking market it dominates, into the highly competitive carrier market and the risky, lower margin consumer market. Over the next few years, large telephone companies around the world are expected to build out huge IP networks to support broadband and new services like IP telephony and IP video. The market is expected to surge about 20 percent a year, nearly twice that of the corporate market, which is where Cisco has traditionally made its money. "The carrier market is key for Cisco," said Dave Passmore, an analyst with the Burton Group. "There's tremendous upside here. This is the only market that they don't have to dominate, and they can still find some significant growth."
Looking toward the next frontierCisco was incorporated on Dec. 10, 1984, by Leonard Bosack and Sandra Lerner, a married couple who worked in computer operations at Stanford University. Using software originally written by another Stanford staffer, Bosack adapted the code to connect computer systems across a network. He and Lerner, who have since divorced, commercialized the product, and Cisco was born.As legend would have it, the couple maxed out their credit cards to fund Cisco. They recruited friends to help assemble routers in their living room. Twenty years later, Cisco has more than 30,000 employees and is the largest networking company on the planet, bringing in $22 billion in revenue during fiscal 2004, with a market capitalization of $127.61 billion.Over the past two decades, it has built a brand synonymous with the Internet. John Chambers, the smooth-talking CEO who took over for John Morgridge in 1995, has been at the center of Cisco's success. One industry analyst said Chambers, who talks with a southern twang, is so slick he could sell snake oil to a snake oil salesman. According to industry lore, Chambers has flown all over the world when his charm has been called into action to close important deals.Cisco fancies itself an innovative technology company. In fiscal year 2004, which ended in July, it spent about $3.3 billion on research and development.
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