Cisco Systems
By Gediminas Sumyla
Company overview
 Cisco Systems, Inc. is the worldwide leader in networking
for the Internet. Today, networks are an essential part of
business, education, government and home
communications, and Cisco Internet Protocol-based (IP)
networking solutions are the foundation of these
networks.
 Cisco hardware, software, and service offerings are used
to create Internet solutions that allow individuals,
companies, and countries to increase productivity,
improve customer satisfaction and strengthen competitive
advantage. The Cisco name has become synonymous
with the Internet, as well as with the productivity
improvements that Internet business solutions provide.
Mission and vision
 “At Cisco, our vision is to change the way people work, live,
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play and learn” – Cisco
Company’s mission is to enable people to make powerful
connections-whether in business, education, philanthropy, or
creativity.
Cisco Systems also strove to deliver a wide range of new
products, expand its offerings through internal and external
efforts, enhance customer support, and increase its presence
around the world.
Organizations started to recognize the value of their information
networks and the Internet as a source of business advantage;
all of this drove company’s mission and vision.
Cisco saw the need for multiservice network and were trying to
find the ways how to integrate voice, video and data networks
together.
Executive leadership team
 John T. Chambers - Chairman and Chief
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Executive Officer
Gregory Akers - Senior Vice President and
Chief Technology Officer for Global Government
Solutions
Tony Bates - Senior Vice President/General
Manager, Service Provider Routing Technology
Group
Susan Bostrom - Executive Vice President,
Chief Marketing Officer, Global Policy and
Government Affairs
Owen Chan - President, Asia Pacific Theatre
Executive leadership team
(cont’d)
 Jonathan Chadwick - Senior Vice President, Corporate
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Controller, and Principal Accounting Officer
Mark Chandler - Senior Vice President, Legal Services,
General Counsel and Secretary
Chris Dedicoat - President, European Markets
Wim Elfrink - Executive Vice President, Cisco Services &
Chief Globalization Officer
Charles H. Giancarlo - Executive Vice President and
Chief Development Officer, Cisco Systems, Inc. and
President, Cisco Systems-Linksys, LLC
Rebecca J. Jacoby - Senior Vice President and Chief
Information Officer
Yasuki Kurosawa - President, Cisco Systems KK
John P. Morgridge - Chairman Emeritus
History
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1984 - Computer scientists, Len Bosack and Sandy Lerner, from
Stanford University, found Cisco Systems. They invented technology to
link their disparate computer systems together.
1985 – first corporate logo is developed and first system the MassbusEthernet Interface Subsystem (MEIS), is shipped.
1986 - Cisco forever changes the networking communications industry
and the Internet by launching its first routing innovation, the AGS multiprotocol router.
1988 - John Morgridge joins Cisco as President and CEO.
1989 – Revenues reach $27 million.
1990 – Revenues reach $69 million. Cisco goes public on February 16,
listed as “CSCO” on the NASDAQ.
1991 – Revenues reach $183 million. Market capitalization reaches $1
billion.
1993 – Revenues reach $714 million. Cisco makes its first acquisition:
Crescendo Communications and its 100-Mbps Copper Distributed Data
Interface (CDDI) technology. With the acquisition of Crescendo, Mario
Mazzola joins the company.
History (cont’d)
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1994 – Revenues reach $1.3 billion. Cisco becomes the first major supplier of Multiprotocol
internetworking products to be awarded ISO 9001 certification—an internationally recognized
endorsement for quality management and quality assurance.
1996 – Cisco makes acquisitions with such companies as TGV Software, Inc., Stratacom, Inc.,
Telebit Corp’s MICA Technologies, Nashoba Networks, Netsys Technologies, Inc., and Metaplex,
Inc.
1997 - Cisco makes its first appearance in the Fortune 500 at number 332. Revenues reach
$6.5 billion. Makes acquisitions with more companies and corporations such as Ardent
Communications. Cisco introduces first in a series of products aimed at the voice-over-IP and
fax-over-IP markets; Outlines the first phase of voice/video/data integration strategy.
1998 – Revenues reach $8.5 billion. Cisco becomes the first company in history to achieve a
market capitalization of $100 billion in just 14 years. Makes acquisitions with such companies as
American Internet Corp., and Pipelinks, Inc.
1999 - Fortune magazine recognizes Cisco as one of the top 25 best places to work in America
and the 8th most admired company in the world. Market capitalization reaches $300 billion.
Makes acquisitions with about 20 companies and corporations. Cisco forms partnerships with 10
leading companies to create standards for wireless Internet technology.
2000 - Cisco became the world’s most valuable company, in terms of market cap, on March 27,
with a high of $82 a share (market cap: $569B), closing at $80.06 (market cap: $555B). Makes
acquisitions with about 30 companies and corporations.
2003 - Cisco entered home networking market with its acquisition of The Linksys
Group. Cisco receives Presidential Award for Corporate Leadership.
2006 – Revenues reach $28.5 billion.
Key players
 John Morgridge – he shaped the Cisco
culture from day one, focusing on customer
satisfaction, product quality, and frugality.
 John Chambers – was known for his fair but
ultra-competitive nature. He is a former IBM
and Wang Laboratories marketing and sales
veteran, fostered Cisco’s strong customer
focus and was credited with continuing
Cisco’s striking success in the networking
industry.
Goals and strategies
 Company was trying to expand rapidly and offer new
services and products. The main element of Cisco’s
strategy during this expansion phase was to maintain a
passionate customer focus and consistently try to exceed
customer expectations.
 Company targeted three key markets: enterprise, service
providers, and small/medium business.
 John Chambers wanted to enhance and expand already
recognized brand and increased Cisco’s marketing to
include television, Internet, and print advertising.
 Cisco also strove to maintain its product leadership in
each of the market segments it already served. The
product leadership strategy involved the innovation of
Cisco’s engineering teams, complemented by alliances,
acquisitions, and minority investments.
Goals and strategies
 As the networking space became more competitive, and as
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minimizing time to market became more important, Chambers
realized that Cisco could not keep up with the changing market
needs solely through internal development.
Acquisitions and alliances to gain access to world-class
technologies and people became a defining component of
Cisco’s strategy.
This strategy is relatively unique: most high-tech companies
considered looking to the outside for technological help a sign
of weakness.
“The companies who emerge as industry leaders will be those
who understand how to partner and those who understand how
to acquire.” – John Chambers, CEO.
If Cisco did not have the technological capability, engineering
capacity, or time to develop the product internally, the business
development group would opt to acquire or partner with external
player.
Goals and strategies (cont’d)
 Cisco was an active minority investor, which
gave it insight into new technologies without
having to deploy internal development
resources.
 Cisco was the most effective tech company at
identifying, acquiring, and successfully
integrating companies into its culture.
 “When we acquire a company, we aren’t simply
acquiring its current products, we’re acquiring
the next generation of products through its
people.” – John Chambers, CEO.
Market and industry
 With an early foothold in this rapidly growing industry,
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Cisco quickly became the leader in the data networking
equipment market – the “plumbing” of the Internet.
By 1997, Cisco made approximately 80% of the largescale routers that powered the Internet.
Cisco held the number one or two position in most
markets in which it competed.
Customers sought end-to-end networking solutions.
The ongoing deregulation of telecommunications and
technology convergence were driving the trend toward
the integration of voice, video and data networks.
Telecommunications market consisted of $250 billion.
E-Commerce opportunities
 Historically there were three separate types of networks:
phone networks for transmitting voice, computer
networks for transmitting data, and broadcast networks
for transmitting video – but advances in digitalization
allowed these forms of communication to be translated
into binary computer language.
 This made it possible to transmit voice, data and video
over one network more efficiently and economically than
using three disparate networks.
 Cisco believed that this transition to this new networking
would enable to capture share in $250 billion market.
 Cisco was already a leader in networking, had excellent
engineering and management teams and saw this
opportunity as the best match for company.
E-Commerce initiative
 Cisco decided to address three key issues: time-to-
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market, recruiting top talent, and integration with the
relevant Cisco business unit.
Wu Fu Chen, networking entrepreneur and two Cisco
employees launched new networking company.
The product concept had potential, and the founding
team was flush with engineering talent.
Cisco management team called this spin-in venture
Ardent Communications. Wu Fu was the president and
CEO.
“Make this product and we’ll give you lots of money.” –
Mike Volpi, vice president of business development.
For Cisco to buy new company, Wu Fu and his team
needed to develop a traffic aggregation device for data,
voice and video with certain functional requirements.
Ardent Communications
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First product was called Ardent 101.
Ardent 101 requirements included ability to accept data, voice and video
traffic, up to 2 Mbps traffic, support ATM, frame relay, and TDM trunks.
Milestones for Ardent 101 included: after six months company shall
have completed the specifications for function, architecture, and design
for the product; after twelve months begin integration of product, after
fifteen months begin beta program for the product, after eighteen
months first customer shipment should occur.
Cisco gave the founding team and employees a large ownership
position – over 55% on a fully diluted basis.
Retaining employees: Cisco laid out a four-year vesting period for the
options granted to employees – 25% would vest after the first year, with
the remainder vesting monthly over the next three years.
The founding team proposed a simple put/call structure that would give
Cisco the option to purchase the company at a prespecified price, but
would also obligate Cisco to purchase the company if the new team
succeeded in building the product.
Perspective analysis
 Technological drivers of change: companies
recognized the need for multiservice network.
Growing technological world built a need for
high-speed networking. Advances in
digitalization allowed forms of communication to
be translated into binary computer language.
The ongoing deregulation of
telecommunications and technology
convergence were driving the trend toward the
integration of voice, data and video networks.
The evolution of network infrastructure was
creating business opportunities in virtually every
sector of networking.
DSIR
 Cisco wanted to become “get it right and
get big” company. Most of the
networking equipment market were
Cisco’s products. Cisco was known for
excellent brand, quality products and
superior customer service. Cisco
enjoyed 80% market share.
Missed opportunities
 Cisco could have hired external talent and
engineers to develop and build the product in
the company. This could have saved money
and problems that they faced making
acquisitions with companies. This would also
save money and time that Cisco spent on
integrating those companies into Cisco
business unit. This strategy would also give
engineers and hired talent advantage of
working within the company, cooperating with
existing employees and using company’s
experience.