Cisco Systems routes packets and routs competitors with equal efficiency. Dominating the market for Internet Protocol-based networking equipment, the company makes and sells routers, servers, security devices, Internet conferencing systems, set-top boxes, and other networking equipment to businesses and government agencies. The company also provides consulting services and offers products for a growing array of household, industrial, medical and other gadgets that connect to the Internet. Cisco sells its products primarily to large enterprises and telecommunications service providers, but it also markets products designed for small businesses. Cisco Systems was founded in 1984 by Stanford University graduates.
While the Americas is Cisco's largest market, accounting for nearly 60% of its sales, about half its employees reside outside of the US. Cisco's US headquarters is in San Jose, California. It also has headquarters in Amsterdam and Singapore. Cisco has a Globalisation Centre East campus in Bangalore, India. The company has other significant operations in Belgium, China, France, Germany, India, Israel, Italy, Japan, Norway, and the UK.
Cisco's revenue increased 6% in fiscal 2013 (ended July) to $48.6 billion, as product sales increased by 5% and sales of services rose 9%. Product revenue increased by 7% in the Americas (Cisco's largest market), led by solid growth in the service provider and commercial markets, and, to a lesser degree, growth in the enterprise market. The acquisition of NDS early in fiscal 2013 drove revenue growth in the service provider market. From a country perspective, product revenue increased by 9% in the US, 13% in Brazil, and 7% in Mexico. Product revenue rose a lackluster 3% in the Asia. while Europe, the Middle East and Africa (EMEA) reported essentially flat sales.
Service revenue grew across all of Cisco's geographic segments, with the Americas (up 10% year over year) leading the way, followed by Asia and EMEA, up 6% and 5%, respectively. Worldwide technical support services revenue increased 6%, and worldwide advanced services, which related to consulting support services for specific network needs, grew by 16%.
Fiscal 2013 marked the fifth consecutive year of increasing sales for Cisco, following a drop off in fiscal 2009. Net income grew 24% in fiscal 2013 compared to the prior year, to $10 billion.
India, Mexico, and Russia, which all reported strong sales growth, were bright spots for Cisco in fiscal 2013. However, the networking giant faced macroeconomic challenges, particularly in the fourth quarter, in China and Japan.
Cisco's dominant market position in switches and routing and aggressive pricing strategy have helped it to gain market share from rivals Juniper Networks and Alcatel-Lucent. In addition to the core routing and switching products, Cisco is also focused on becoming a leader in the fast-growing market for next-generation data center products. Other markets the company is looking to as ripe for growth include cybersecurity, data centers, and cloud-based products. Geographically, the company is investing in emerging markets such as Russia, China, Brazil, Mexico, and India.
Citing a challenging and inconsistent global economy, especially in emerging markets like China (a growth driver for Cisco), the networking giant in August 2013 announced it will lay off 4,000 employees, about 5% of its global workforce. The move follows nearly 8,000 job cuts in the past two years. Shifts in the networking market, with some large enterprise companies opting to buy their equipment from low-cost Chinese vendors, is putting the competitive heat on Cisco.
The company adheres to an aggressive growth strategy, making numerous acquisitions in high-growth segments, such as cloud and mobile.
Mergers and Acquisitions
Cisco is a highly acquisitive company, bolstering its offerings with purchases both large and small. In mid-2014 it paid $175 million for Tail-f Systems, a Swedish company that provides multi-vendor network service orchestration for traditional and virtual networks. The acquisition will boost Cisco's cloud virtualization offerings.
In 2013 it bought five companies, ending with San Jose-based Insieme Networks, a privately-held developer of application-centric infrastructure products, in December. In October the company purchased New Jersey-based WHIPTAIL, an all-solid-state array vendor, for about $415 million in cash. Cisco will use WHIPTAIL's capabilities to enhance its Unified Computing Systems, a rack that combines servers, storage, and networking, and which is sold into the data centers of large companies. Also in October Cisco bought cybersecurity firm Sourcefire for some $2.7 billion, its largest buy of the year. IT security firms are a hot commodity, and Sourcefire fits with the company's strategy to boost its holdings in the area. In mid-2013 Cisco purchased enterprise IT energy management firm JouleX for about $107 million. The privately held company complements Cisco's EnergyWise technology. Also that year it acquired data virtualization software firm Composite Software.
In 2012 Cisco closed one of its largest transactions ever when it paid about $5 billion to buy UK-based NDS Group, a provider of software and content security products, such as cards and set-top boxes, for pay-TV operators. Besides ramping up Cisco's video services, such as its Videoscape streaming platform, NDS gave it greater access to emerging markets such as China and India. Major NDS customers include BSkyB, DIRECTV, and Vodafone. Also that year, Cisco bought Pennsylvania-based Lightwire, a developer of optical interconnect technology that supports higher bandwidth in networking applications at a lower cost; ClearAccess, a developer of software used in provisioning and network management applications; and San Francisco Bay area-based Truviso, which provides software for real-time analytics and reporting. It ended the year by purchasing cloud networking firm Meraki for some $1.2 billion.