Computers in Management

1
Computers in Management Professor John Gallaugher
Section 4, Group 3 Hal Cutler, Al Dea, Billy
Duff, Monica Griffin Jen Thomasch, Nick Worall
2
Early History

• Founded in 1984 by Leonard Bosack and Sandy
  Lerner
• Originally developed software to link computers
  on different operating systems and created
  routers
• How Cisco dominated the market

3
Todays Sources of Competitive Advantage

• Cisco IOS (Internetwork Operating System)
• Cisco Powered Network (CPN) program
• Geographical Diversification
• Diverse Customer Base and Market

4
Cisco IOS

• Explanation of IOS
• How IOS can be leveraged for competitive
  advantage
• Feedback Loop
• Pricing at a premium

5
CPN Program

• How to Qualify
• Perks to Qualified Partners
• Benefits for Cisco

6
Geographical Diversification

• Markets spread across 70 countries
• Recent Deal with Haier Group

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Diverse Customer Base and Markets

• Huge investment in Research and Development.
• Large product portfolio.

8
Size

• Worldwide leader in networking that transforms
  how people connect, communicate and collaborate
• Has transformed from a small group of Stanford
  University computer scientists in 1984 to a
  company that employs over 60,000 people today.
• Headquarters San Jose, CA, other offices in US.
• International offices in more than 20 countries.

Boxborough, Massachusetts Headquarters.
9
Revenue and Profitability

• Revenue 34.9 billion (fiscal year 2007)
• Earnings Per Share EPS 1.2 Net
  Income/Outstanding Shares.
• Dividends 0 (so Cisco is able to reinvest more
  money into future growth.)
• Invest nearly 5 billion a year in RD.
• According to most analysts Cisco is overweight
  (it should outperform its industry, sector, or
  market altogether) and is a recommended buy or
  hold.

10
Stock Performance

• Stock symbol CSCO
• IPO .06 (February 16, 1990)
• Current Price 32.29 (October 16, 2007)
• 52 Week Range 23.27 to 33.38

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How does Cisco make money?

• Cisco is the market leader in multiple areas,
  such as routing and switching, unified
  communications, wireless and security
• Involve regular people through the sale numerous
  hardware and software products under 5 main
  brands names Scientific Atlanta, Iron Port,
  WebEx, Cisco, and Linksys
• Channel partner program Ciscos most important
  sales force (accounts for 90 of the companys
  revenue.)
• Large corporations and telecommunication service
  providers across the globe earn one of four
  certification levels based on criteria specified
  by Cisco.
• Based upon this certification Cisco determines
  the amount of increased benefits it supplies the
  company to become more skilled and thrive in
  their field.

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Industry and Market Size

• Networking and communications devices
• Networking and communications devices
• Cisco faces 26 competitors within the domestic
  industry
• Some companies compete across multiple product
  lines, others solely in a specific area
• Of the 235B market cap on the industry, Cisco
  has 202.6B, or 86
• Juniper Networks, Inc., 19.3B or 8

13
Industry and Market Size

• Growth
• Networking and communications devices industry
  reported a net profit margin growth of 17.4
• Cisco had growth of 21
• As businesses and consumers need networking and
  communications devices, industry continues to
  grow
• Cisco is dominant among market, so as the
  industry grows it grows along with it

14
Industry and Market Size

• Acquisitions
• From 1993-2007 123 acquisitions.
• 2003 Linksys, represented entrance into the home
  networking market.
• 2005 Scientific Atlanta completed solution for
  networks and the home set-top boxes, end-to-end
  video distribution networks, and video
  integration system.
• 2005 KiSS Technology, access to internet through
  DVD player.
• 2006 Arroyo Video Solutions, video-on-demand
  software.
• 2006 MovieBeam, developed with Disney and Intel,
  video-on-demand for fee.

15
Relationship between Tech and the firm

• Enterprise Resource Program (ERP)
• Cisco uses ERP which is supply chain and
  Warehouse and Logistics Management Software.
• ERP allows Cisco to organize orders and produce
  products quicker.
• Allows Cisco to organize and manage information
  efficiently.

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Relationship between Tech and the firm

• IT Alpha
• Ciscos Engineering Computing Services and IT
  combined to form IT Alpha
• Manages all of Ciscos production networks and
  testing productions.
• Manages, Controls, and administers a second
  network to safely test new products.
• Links parts of Cisco production that could not
  have been linked before.
• IT Alpha has evolved into INSET (Intelligent
  Network Systems Emerging Technologies)

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Relationship between Tech and the firm

• OCC
• Cisco has an operations command center (OCC)
  which is crucial to fixing downed resources that
  are necessary to engineers and production.
• The OCC is notified within seconds of the
  problem.
• The team can have running support pages up within
  five minutes.
• Greater efficiencyLess wasted time.

18
Opportunities and Threats

• Threats
• Huawei-(Networking and Communications equipment)
  Leading Telecommunications firm in China,
  increasingly competing with Cisco because of its
  ability to cut costs. Has won away some contracts
  that Cisco has typically gotten in the past.
• Microsoft Corp.- Microsoft used Ciscos wireless
  technology but recently switched to another rival
  competitor of Cisco. Also, Cisco and Microsoft
  partnered to work on Server Communications
  software and equipment, but now Microsoft is
  doing that in house.

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Opportunities and Threats

• Opportunities
• Cisco East- Opened up in Bangalore India to tap
  into a new market and to compete in the global
  sphere. (Possibly with Huawei?)

20
Opportunities and Threats

• 24 and The Office-New methods of advertising.

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Questions?