Cisco's moment of truth

The networking giant made more money from new products and services than from routers and switches

Cisco achieved a milestone in its most recent fiscal quarter, one with profound implications for the future of the company: Cisco made more money from its new products and services than it did from routers and switches.

Naturally, the network giant has long known this day would come, and has been more than just preparing for it. Cisco has been embracing the change, actively pursuing it for years. Every major move has been toward what it calls "market adjacencies," toward products that by some logic relate to Cisco's traditional, core markets but are actually brand-new territory for Cisco.

That's the logic that has gotten this router vendor neck-deep into selling everything from set-top boxes to blade servers to video cameras. In fact, the company has its hands in about 30 "market adjacencies" right now.

But this strategy is creating difficulties for Cisco even as it creates opportunities. In the data center, partners such as HP and IBM are now bitter rivals. In the retail stores, Cisco is still struggling to understand what consumers will buy - and at what price. And meanwhile, in its router backyard, Cisco is losing market share to companies with a sharper focus.

Overall, the scattershot approach of getting into 30 new markets - of fighting a war on dozens of different fronts - is starting to take its toll. Analysts in Jim Duffy's insightful story this week (page 1) argue that Cisco has been too aggressive, trying to maintain a rate of growth that may no longer be realistic as a $40 billion company. Indeed, the story also reports that Cisco is quietly curbing its growth goals.

Certainly, this is the road Cisco had to take. The company's longstanding determination to be first or second in every market it competed in served it well. When it had dominated its primary markets, Cisco needed new worlds to conquer; it found them and it went after them.

But now Cisco is at an interesting point in time. It's not a young company anymore, and it can't move like a young company, no matter how many start-ups it absorbs. If Cisco were a person, you might say it's graduating from college. It's been Big Man on Campus. It's done a lot of experimentation. But now it's time for Cisco to figure out what it wants to be when it grows up.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags business issuesciscoIBMrouterfinancial resultscorporate issuesEthernet SwitchLAN & WAN

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Jeff Caruso

Network World
Show Comments

Essentials

Mobile

Exec

Budget

TerraCycle Zero Waste Box Pens and Markers Small

Learn more >

Back To Business Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?