Cisco Systems makes the network gear -- routers, switches, and servers as well as software -- that move information around the internet. The company, which has dominated the market for Internet Protocol-based networking equipment, also makes security devices, internet conferencing systems, set-top boxes, and other networking equipment to businesses and government agencies. Software that controls networks has become an increasing focus for Cisco, which also provides consulting services. Most sales come from customers in the Americas. Cisco's primary customers are large enterprises and telecommunications service providers, but it also sells products designed for small businesses.
The meat-and-potatoes of Cisco has been its switching equipment, which generates 30% of its revenue. In 2016 (ended July), sales of switching equipment were flat in relation to 2015. Its next-generation networking routing gear accounts for 15% of revenue. About a quarter of Cisco's revenue comes from its services business. In 2016 (ended July), the company reported solid revenue growth in its security and switching products used in data centers, and in its collaboration, and services categories.
All of Cisco's manufacturing is carried out by contract manufacturers. Independent third-party contractors make printed-circuit boards, conduct in-circuit testing, make product repairs, and assemble products.
While the Americas is Cisco's largest market, accounting for some 60% of its sales, about half its employees reside outside of the US. In 2016 (ended July), sales dropped 1% in the US, remained constant in Europe (25% of revenue), and rose 5% in the Asia/Pacific region (15% of revenue).
Cisco's headquarters is in San Jose, California. It also has regional headquarters in Amsterdam and Singapore. Cisco has a Globalization Center East campus in Bangalore, India. The company has other significant operations in Belgium, China, France, Germany, India, Israel, Italy, Japan, Norway, and the UK.
At $49.25 billion, Cisco's revenue barely budged in 2016 (ended July) from 2015. A 5% decrease in next generation networking products was blamed on cautious spending by service providers. The company lost about $1.1 billion in revenue year-to-year in its service provider video unit before selling it in 2016.
Net income rose a healthy 19% to $10.7 billion in 2016 from just under $9 billion in 2015 because of lower costs in 2016. For example, it spent $186 million on advertising in 2016, compared to $202 million in 2015.
Cash flow from operations closed out 2016 at $13.5 billion, about $1 billion higher than 2014's number.
Cisco has been a hardware company, making the switches and routers and other device for office networks to the internet. But it is building up its software offerings for cloud computing and software-defined networks (SDN). Telecom service providers, in particular, are moving toward SDN to program their networks. In response, Cisco is shifting its business to a more subscription and software-based model. To address the emergence of SDN, the company offers its Application Centric Infrastructure (ACI), which delivers centralized application-driven policy automation, management, and visibility of both physical and virtual environments as a single system. The system is composed of Cisco's Nexus 9000 portfolio of switches, improved versions of its NX-OS operating system, and the Application Policy Infrastructure Controller (APIC).
While Cisco has added to its SDN and cloud capabilities through acquisitions, it also maintains a research and development budget of about $6.3 billion a year. R&D investment targets include data center infrastructure management and automation software within the Cisco UCS Manager and UCS Director products.
Moving to bolster relationships with telecom equipment makes, Cisco entered into a deep partnership with Ericsson, one of the biggest that area. The companies intend to cooperate to develop products and services in areas such as 5G, cloud computing, Internet protocol, and the Internet of Things. Their goal is to add $1 billion in revenue for each company by 2018. With their strategic partnership, announced in 4Q 2015, the companies are collaborating to develop networks and systems-based management and control products and work together in key emerging market segments. The companies will work together specifically on virtualization technologies and software-defined networks. In Ericsson, Cisco gets a partner with complementary strengths in technologies and in markets around the world.
The deal helps Cisco and Ericsson counter the merger of Alcatel-Lucent and Nokia, which created the second biggest provider of telecom equipment ( Huawei is #1) .
Cisco sold the Service Provider Video CPE business to Technicolor for $542 million ($372 million in cash and $170 million in Technicolor stock) in order to investments and accelerate the shift of its service provider video products toward cloud, security, and software-based services.
Mergers and Acquisitions
Cisco actively acquires companies to expand technologies and fill gaps.
In 2016 Cisco completed the acquisition of Jasper, which develops a cloud-based Internet of Things (IoT) service platform, for $1.4 billion. With the deal, Cisco can provide more comprehensive range of IoT products and services.
The $700 million acquisition of Acano Limited brought on board a provider of collaboration infrastructure and conferencing software. The move was made to enhance Cisco's collaboration strategy.
In acquiring CliQr Technologies, an application-defined cloud orchestration platform provider, for $260 million, Cisco aims to bolster its offerings for private, public, and hybrid cloud deployments.
In 2015, Cisco acquired real-time communications startup Tropo. Cisco intends to use Tropo's technology to provide a user-friendly collaboration platform. The company added another collaboration technology in late 2015 with its $700 million purchase of Acano, based in the UK. Acano will become part of Cisco's Collaboration Technology Group.
In another 2015 acquisition, Cisco bought OpenStack provider Piston Cloud Computing to help accelerate the development and capabilities of Cisco Intercloud Services.
Cisco added to its security offerings with its acquisition of Lancope for $425 million in 2015. The companies have worked together, but with the acquisition they can integrate their products more tightly with the goal to detect networks threats faster.