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Cisco Case Analysis
- 2. Part One: Introduction and External Analysis
- 4. Incorporated on December 10, 1984
- 6. Surpassed 39 billion in revenue in 2008
- 7. Corporate headquarters located in San Jose, California
- 8. 32 factories worldwide, 30 of them are outsourced.
- 10. Cisco Demonstrates Leadership in Virtualized, Scalable, Cloud- Ready Data Centers with Customer and Technology Milestones
- 12. Industry Consolidation – Few competitors in their main product area
- 13. In 2006 they had 70% of the share of its core router and switch market.Juniper Networks and Hewlitt-Packard selected as benchmarks. Cisco's Chambers Problem Cisco Competition
- 14. Cisco’s Mission Statement Shape the future of the Internet by creating unprecedented value and opportunity for our customers, employees, investors, and ecosystem partners. Vision Changing the Way We Work, Live, Play, and Learn. Cisco has a very bland and basic mission statement that only ranks as an “ok” (5) on the MVV evaluation.
- 19. Product and services expansion
- 20. Market of Airline Industry
- 21. Reusing existing Cisco gear to act as mobile POPs
- 23. Price wars
- 25. Margin erosion
- 28. Router and switch market share discourages new entrants
- 29. Switching costs are high(reduce buyer power)
- 30. Acquisitions removes some threat of startup success
- 32. MSFT – Threat of new entrant (bundle unified communications software)
- 33. GOOG – Threat of new entrant (desktop video conferencing market)
- 34. Vyatta – Substitute (open source hardware)
- 37. Asian Market – Tata Communications
- 38. Server growth – up 700%
- 40. Juniper announced data center
- 41. Juniper entered into a partnership with IBM to handle network connectivity for the latter’s cloud computing
- 42. 3COM emerging into markets like China
- 43. Juniper’s high-end switches (EX) and Junos OS
- 47. Smart Grid Technology (10)
- 49. MSFT – Threat of new entrant (bundle unified communications software) (7)
- 51. Juniper/IBM (9)
- 52. Juniper’s data center (10)Avg. ~ 47/5 = 9.4 Avg. ~ 43/5 = 8.6 O-T ~ 9.4 – 8.6 = .8
- 53. Part Two: Internal Analysis
- 54. Net Income Trends -CSCO & Benchmarks
- 55. CSCO Quarterly Earnings vs. Consensus Estimates
- 56. Revenue by product category and service
- 57. Key Income Statement Data FY2010
- 58. Key Balance Sheet Data FY2010
- 59. Cash flow Data fy2010
- 60. Important Financial Ratios FY2010
- 61. Applying Altman’sBankruptcy Formula Z = 1.2*A + 1.4*B + 3.3*C + 0.6*D + 1.0*E, where; A = Working Capital / Total Assets (%) B = Retained Earnings / Total Assets (%) C = EBIT / Total Assets (%) D = Market Value of Equity / Total Liabilities (%), and E = Sales / Total Assets “Scores below 1.81 indicate significant credit problems while scores above 3.0 indicate a healthy firm. Scores falling between 1.81 and 3.0 indicate question marks.”
- 62. Z-Value
- 63. Index of Sustainable Growth g* = [P(1-D)(1+L)] / [T-P(1-D)(1+L)], where P = (Net Profit before Tax / Net Sales) x 100 D = Target dividends / Profit after Tax L = Total Liabilities / Net Worth T = (Total Assets / Net Sales) x 100
- 65. Credit Ratings March 9, 2011-Standard & Poor's Ratings Services said today that it assigned its 'A+' issue rating to San Jose, Calif.-based Cisco Systems Inc.'s (Cisco) three tranches of senior unsecured notes.
- 66. Cisco Stock Price History
- 67. CSCO Stock Price – 5 year trend
- 68. CSCO Stock Price – 2 year Trend
- 69. Financial success Statement In fiscal 2010, we saw a solid return to balanced growth across geographies, product and customer markets exemplified by Cisco reaching over $40 billion in fiscal year revenue. We focused our efforts on defining true innovation and operational excellence within our company. And we improved our position as a strategic partner to customers worldwide by showing how the network has become, in our view, the most strategic asset in communications and information technology (IT) today.
- 70. ANALYSIS OF MARKETING POSITION
- 72. 2007 = 34.90 Billion
- 73. 2008 = 39.60 Billion
- 74. 2009 = 36.10 Billion
- 76. Cisco Long Term Quarterly Sales from 2006-2010 cont. 2010 Quarter 1: 9.00 Billion Quarter 2: 9.80 Billion Quarter 3: 10.40 Billion Quarter 4: 10.80 Billion
- 78. Market Share of stocks
- 85. Hewlett-Packard has been particularly aggressive in the switching market since they have entered.
- 86. Cisco’s video-conferencing system for living rooms has been a strange product to market.
- 91. 65 Executives
- 92. 56 men
- 95. Top Five – 2010 Compensation & Tenure John Chambers – $18.9 million in 2010
- 97. Focus on core networking capabilities while expanding into product markets where the network as a platform is increasing.
- 100. 20% of senior leaders have left since the switch
- 101. 30 new businesses, 20 more to come
- 105. Short Term & Long-Term
- 106. Core SBU Level Strategies
- 108. Distinctive Competencies Acquisitions Smart-grid technology (form of routing or switching) as noted by CEO John Chambers.
- 110. Protect and extend product market leadership
- 112. Sports and entertainment
- 113. Smart Grids
- 114. Virtual healthcare
- 116. Use the products they develop
- 117. Recently upgraded their ERP to Oracle 11i
- 118. Purchasing
- 119. Data Storage
- 122. Increased their revenue by 33% from ‘09 to ’10
- 123. Q2 ‘FY11 Sales down $132 million
- 124. 70% of the market share
- 126. 90 percent of frequent users save at least two hours of work time per week through video collaboration
- 127. It is possible to achieve 100% ROI in 5 years and payback periods of 21-40 months
- 131. Reduce energy costs
- 132. Optimize use of space, power, and cooling infrastructure
- 134. Business Continuance
- 135. Workforce ProductivityCloud Computing Explained
- 137. Care-at-a-distance technology that combines video, audio and medical information
- 138. Patients will be able to view the medical exam
- 140. The revenue has declined 7% in the latest quarter because they are under attack by competitors such as HP.
- 141. Cisco’s consumer products such as Linsksys routers, Flip video cameras, etc. don’t stand a chance against Apple.
- 142. They need to market their products more efficiently and spend more money on marketing popular products than products that serve a small niche market.
- 144. Corporate social responsibility key performance indicators
- 145. Corporate social responsibility key performance indicators
- 146. Corporate social responsibilitykey performance indicators
- 148. Strategy Choice (Grand Strategy Matrix)
- 151. Robust Balance Sheet (9)
- 152. Human Network/Smart Grid (9)
- 154. High pricing - cheaper alternatives(8)
- 157. Acquisition Integration (9)Internal Strengths and Weaknesses Avg. ~ 44/5 = 8.8 Avg. ~ 38/5 = 7.6 S-W ~ 8.8 – 7.6 = 1.2
- 158. Swot Matrix and Grand Strategies Cisco – (1.2, 0.8)
- 160. Strong strategic alliances with MSFT, IBM, AT&T, Dell, Intel
- 161. All sales in all geographic locations went up
- 162. Low market share in consumer products
- 163. Strategy of buy, build and partner
- 165. Short-term Prospects and Options
- 166. How strategy options support long term survival.
- 168. Cisco can go about that by developing brand recognition within their consumer market.
- 171. Cisco partnered with German electricity company Yello Strom to launch a smart-grid pilot project in 70 German homes and businesses.
- 172. Eliminate blackouts and brownouts
- 176. 1. Responses to CDProject.net
- 178. Extend lifecycle / reduced power consumption
- 179. Optimized processes
- 181. Reduce Greenhouse gas emissions
- 182. Innovative software added to the Cisco Catalyst switching portfolio
- 183. Available for customers to download
- 185. Power management
- 188. Comply with government directives
- 189. Recycling
- 190. Use end-of-life programs that reduce the overall impact of the environment
- 191. These end-of-life programs are designed to reuse or harvest the material commodities contained in the equipment collected and return those materials to the market where they are made into new products
- 193. Virtual worker
- 194. Remote collaboration
- 197. Certifications
- 198. Data Usage and Protection Certificate (Certificate I)
- 199. Code of Ethics Certificate (Certification II)
- 200. Supplier Environmental Health and Safety Certificate (Certificate III)
- 203. Optimize operations
- 204. Reduce GHG emissions
- 206. Recycle
- 209. Any Questions?
Notas del editor
- Cisco designs, manufactures and sells Internet Protocol (IP)-based networking and other products related to the communications and information technology industry and provides services associated with these products and there use. Their product portfolio consists of a broad line of products for transporting data, voice, and video within buildings, across campuses, and around the world.
- Cisco was founded in 1984 by a group of computer scientists from Stanford University.Cisco was incorporated on December 10, 1984 in California.At the end of Q2 FY2011 (ending January 29, 2011) Cisco has 72,935 employees Surpassed 39 billion in revenue in 2008Corporate headquarters located in San Jose, California32 factories worldwide, 30 of them are outsourced.Spends nearly $5.3 billion a year in R&D, making us one of the top R&D spenders in the world.
- Video Easier to Create, Consume, Search and Share Across the EnterpriseCisco Demonstrates Leadership in Virtualized, Scalable, Cloud- Ready Data Centers with Customer and Technology MilestonesShipped its one millionth Nexus 10Gb Ethernet portReached nearly 4,000 customers, 1,000 being repeat buyersCisco's Unified Computing System revenue grew more than 700%Cisco Connects Businesses to Consumers via VideoAugment in-person meetings and interactions with lifelike video experiencesHD recording and sharing on FaceBook, Flipshare and You Tube
- More Speaking Here
- Fiscal 2010 was a defining year for Cisco following the unprecedented global economic challenges of the year before. This was our opportunity to show the world what a truly great company we are, and to position ourselves to extend our leadership in the years ahead. — John Chambers, Chairman & CEO
- In fiscal 2010, Cisco reported record net sales of over $40 billion, an increase of 11% compared to a year ago. Annual product sales were $32.4 billion, up 11% year-over-year. Service revenue represented 19% of annual sales or $7.6 billion, up 9% from a year ago. Sales across all of our geographic theaters increased when compared to fiscal 2009. We attribute this increase to an improvement in overall demand derived from a gradually recovering global economy as well as, in our view, increased demand for the architectural approach to products and services that only Cisco can offer.
- Cisco has a robust balance sheet. The company features significant cash and cash equivalents and investments of 39.861 billion. Its investments, which are primarily short term in nature, stood at 35.280 billion, compared to last years 29.283 billion.
- Because of the amount of cash that Cisco holds on to it has inflated our “T” value which causes our index to decrease.
- Beg: Amanda Sales long term trend (5 years).http://investor.cisco.com/results.cfm
- AmandaSales by long term (5 years) broken down into quarters… shows growth and decline throughout the years.
- Amanda Sales by quarters continued
- AmandaSales by SBU. What SBU is. Q1 and 2 of 2011http://investor.cisco.com/results.cfmStrategic Management pg. 148
- Amanda Market Share of stoves vs. industry and competitors (averages over the past 5 years).http://investor.cisco.com/results.cfmTalked to a cisco representative and they do not compute their market share, but other companies do it for them occasionally. This is market share of stocks
- AmandaMarketing tactics, timing tactics and market location tacticsStrategic Management pg. 192-195
- AmandaMarketing location tactics cont.
- AmandaI asked Maddocks about the success statements…Got from Cisco website, searched success statement
- AmandaSuccess statement cont.
- Handout form teacher
- AmandaThe structure of the top management / executive team at Cisco (corporate management not board of directiors).http://investor.cisco.com/management.cfm
- AmandaTop management cont.http://investor.cisco.com/management.cfm
- AmandaCompensation. Cisco representative said they don’t give out exact amounts, but this is how they decided to compensate top management for the 2010-2011 years. www.materials.proxyvote.com/cisco/2010/proxystatement
- Chambers - Salary of $382,212, the San Jose company said in a regulatory filing last week. He was awarded stock options valued at $5.69 million and got $4.6 million under the nonequity incentive plan
- Amanda Direction of top management team, asked maddocks where to get info from.
- -$132 million which translates to -9% where Alcatel-Lucent has gained 8%
- Switches join multiple computers together to create a LAN or WAN.
- Extend the working life of capital assetsAvoid or defer construction of new facilities
- Contributing $10 million of product, services and supportCare-at-a-distance technology that combines video, audio and medical informationThe cameras and electronic scopes will enable patients to see and listen to the medical exam in the same manner as the clinician, according to CiscoEnables members of a patient’s care team–primary care provider, specialist physicians, care manager, family members and others–to meet, regardless of location or distance, said the company.
- Handout from teacher
- http://www.cisco.com/web/about/ac227/ac333/cisco-and-citizenship/key-performance-indicators.html
- The company’s robust balance sheet enhances its investors’ confidence as well as allows it to investin the future growth avenues.
- Electricity outages cost U.S. industry about $50 billion per year.Reduce U.S. greenhouse gas emissions equivalent to 60 to 211 million metric tons of CO2 annually in 2030.Generate approximately 280,000 direct jobs across various categories.Obama administration has also increased the maximum award available through ARRA's Smart Grid Investment Grant Programfrom $20 million to $200 million, and the Smart Grid Demonstration Projects from $40 million to $100 million. A power network utilizing present computing technologies will eliminate blackouts and brownouts due to under-capacity, and will enable better overall reliability through advanced monitoring and management.
- http://www.youtube.com/watch?v=qpWPVIhJE-g&feature=relatedhttp://www.youtube.com/watch?v=fU0IcOOduMQ&feature=related
- Regulatory - Operations. Efficiency measures that impact new or existing buildings, changes that impact assets that are direct emitters (e.g., vehicle fleet, diesel generators), and changes that would impact the price of energy (fuels and electricity).Cisco sees a limited risk from increasing operational costs caused by stricter building codes or increasing electricity, fuel and transportation costs. Cisco is not a heavy emitter of greenhouse gases and is therefore less sensitive to changes in regulations than carbon-intensive industries.Physical – Impact could be actual labor availability or political instability caused by or attributed to climate changeGeneral - Market and brand risks are probably the biggest and most clearly defined risks specifically because Cisco has positively differentiated itself with respect to climate change and operational, product and solutions activities to reduce GHG emissions.To address risks associated with regulations on fuel/energy taxes, Cisco has developed an Energy Management department to continually track and monitor Cisco’s global energy consumption and associated GHG emissions. This department also is charged with identifying, evaluating and implementing projects to improve the efficiency of Cisco’s operations and minimize Cisco’s carbon footprint.
- Data – All information about Cisco is confidential and is not for their use.Ethics – We follow the law, No bribes, avoid conflict of interest, avoid unfair business practices, anti-corruption, avoid political and charitable contributions on Cisco’s behalf and unauthorized lobbying.Health and Safety – Regulatory compliance, Hazard ID and risk mitigation, documentation and inspection, suppliers must implement control measures to ensure environmental protection.