Cloud Wars: Cisco Strikes Back
Over the years Cisco has been known as the giant in the networking space and most recently in the videoconferencing market, which the company celebrated its 5th anniversary in October.
They were once the world’s most valuable company with a market cap of $550 billion, which is now just below $100 billion.
After the dot.com bubble burst, Cisco went on acquisition mode in mid-2000’s as part of their goal to diversify into video and consumer space and keep the company afloat. They acquired Linksys for $500 million, Webex for $3.2 billion, and Scientific Atlanta for $7 billion.
Perhaps the most notable acquisition by Cisco was when they bought Flip camera maker Pure Digital for almost $600 million. As they were threading on a completely different water, Cisco closed down the camera business earlier this year.
After failing in its diversification strategy, CEO John Chambers was forced to rethink Cisco’s strategy and drive the company to where it is now.
“What’s impressive is the Cisco turnaround. Cisco has moved from their ‘GE-like’ organization structure to more decentralized decision making,” said SiliconANGLE founder John Furrier.
“This is helping them get back on track. The company has begun to execute on CEO John Chambers’ three-year plan.”
Cisco has been successful so far in the recent quarter, where the company posted record revenues, double-digit product growth and increase gross margins.
In 2009, Cisco made a huge leap when they started to foray into the server business, cutting ties with HP, IBM, and Dell.
Cisco started bundling servers and networking into what is now known as the Cisco UCS.
That year also paved the way for Cisco to partner with VMware in setting up a virtualization and cloud package, which bundles networking and storage with VMware.
“Results in this area have been particularly outstanding, given that we are taking on the big competitors in the data center. As we focus on this market transition with the convergence of server, processing capabilities, networking and storage into the cloud, the UCS in the data center grew year-over-year at 122% in terms of orders and 116% in terms of revenues, and is now at a $1 billion annualized revenue run rate,” Chambers said in Cisco’s most recent financial conference call.
In its first Global Cloud Index study, Cisco stated that cloud traffic will increase 12 times within the next three years or so.
“The growing number of end user devices combined with consumer and business users preference or need to stay connected is creating new network requirements. The evolution of cloud services is driven in large part by users’ expectations to access applications and content anytime, from anywhere, over any network and with any device. Cloud-based data centers can support more virtual machines and workloads per physical server than traditional data centers.”
Aside from the server and networking services, Cisco is also expanding its video services portfolio with the recent $99 million acquisition of startup company BNI Video.
With its focus on UCS, the cloud, and other strong channels, Cisco is off to a good new start. On how they will handle the competition and other factors that affects the ever changing online landscape, that remains to be seen.
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