As part of its quarterly financial reporting, Cisco executives as discussed the strategy for handling the financial downturn. Cisco has approximately $27 billion in cash and investments. It also has a diverse product, geographic and customer segment mix.
Cisco Capital, the company's financing arm, continues to provide financing to customers and channel partners. In fiscal year 2008, Cisco Capital originated or facilitated approximately $4.3 billion in lease and longer-term loan arrangement. Cisco said the number of credit requests or inquiries has increased in the current environment, but that it has adhered to a consistent methodology for balancing risk, reward and sales enablement. The company stated that there has been no material impact to the quality of its portfolio.
Cisco also enumerated a six-point game plan for the current downturn includes:
1. Continue Vision/Strategy/Execution Model. Cisco believes its vision of how the industry will evolve is being driven by the increasing role intelligent networks will play as all forms of communication and IT are enabled by the network. Its differentiated strategy enabled by networked collaboration. The company plans to remain focused on both the technology and business architectures. The overall vision/strategy/execution model continues as present.
2. Collaboration/Web 2.0 driving future growth and productivity. Cisco plans to a rapid expansion of collaborative technologies and new business models in both product architectures and its own internal IT implementation. The company will realign resources to focus on over two dozen market adjacencies that will loosely then tightly come together with its core technologies. Cisco will expand its use of Web 2.0 technologies such as TelePresence, WebEx, wikis, blogs, discussions forums, widgets, etc. in an architectural process-driven approach that drives productivity.
3. Resource management and realignment. Third, through its councils and boards structure, Cisco has already realigned over $500 million of resources to these opportunities. The company plans to realign another $500 million of resources while at the same time reducing expenses for fiscal year 2009 by over $1 billion from the original budget. The goal is to achieve these changes by the end of the fourth quarter of fiscal year 2009. This includes a pause on hiring, as well as reductions in travel, off site meetings, outside services, equipment, events, prototypes, marketing and other activities.
4. Aggressive in strategy. Prioritize and Execute. Cisco said it will be bold in taking good business risk during this downturn to build on market transitions, opportunities, and put its many assets to use in existing and new markets as the recovery occurs. Cisco will prioritize the top five objectives of both the company and each of its councils and boards. It will then align resources to these top objectives. The top objectives for the company are:
- 1) Next generation company and next generation customer relationships-what is called Cisco 3.0 internally;
- 2) Collaboration/Web 2.0;
- 3) Data center/virtualization;
- 4) Video; and
- 5) Globalization.
5. Investment in U.S. and Selective Emerging Countries. Cisco intends to invest aggressively in two geographies: the U.S. and selective emerging countries. The company believes the U.S. will be the first major country to recover. The strategy on emerging countries is simple. Over time Cisco expects the majority of the world's GDP growth will come from the emerging countries. In expanding these relationships during tough times, the goal is to be uniquely positioned as the market turn-around occurs. This is identical to Cisco's strategy during Asia's 1997 financial crisis.
6. Power of the Network as the Platform-Driving the Future of Communications/IT. Cisco will remain focused on its stretch goal of evolving into the top communication and IT company which will be enabled by the expanding role of intelligent networks. http://www.cisco.com
