Tidbits from the opening session of the Cisco Financial Analyst Conference September 2010

If you watch John Chambers' presentation on the opening session of the Cisco Financial Analyst Conference of today, it is difficult not to make a couple of these observations:

1. The demonstration of a highly collaborative educational environment is very eye-opening, and it amplifies the distinction between an Apple iPad and a Cisco Cius. The power of collaborative information exchange seems to have the so-called network effect built into it. Once students around the world start making use of this device, it is easy to imagine Tom Friedman's recent observation: In a flat world where everyone has access to everything, values matter more than ever.
2. John presents excellent arguments as to why commoditization of Cisco's market segment is a distant one: Architectural play, that involves numerous products and processes integrating them. A single product solution cannot even come close. The slide presented on this topic, shown here, is very self-explanatory.





3. Finally, it looks like there will be dividend on Cisco stock, with 1-2% yield, starting from FY 2011, and we are already in the new fiscal year. With the stock closing at $21.45 (+$0.19) today, you can expect to get dividend income anywhere from $0.21 to $0.42 per share of stock; or, even if the stock doubled by July 2011, you may be able expect $0.42, or 1%.

Disclaimer: I am an individual investor in Cisco stock.

Cisco and WebEx

This morning's announcement that Cisco has agreed to acquire WebEx makes it a bit clearer as to the direction Cisco is taking for its evolution. Web-based online meetings are what WebEx has been serving up to its customers, mainly small & medium businesses (SMBs), and this acquisition has a potential to turn small businesses completely online. The advent of Google Apps is but a modest start, also in that direction. And, Microsoft Live has been online for quite some time now.

Makes you also wonder about the kind of value-added applications that would succeed 20-25 years from now.

Cisco, Juniper & Next Generation Networks

In an April 2005 article titled Cisco and Juniper Joust for Supremacy, noted industry consultant Tom Nolle compares and contrasts Juniper's and Cisco's approach.

From a layered perspective, both schemes appear to have the same decomposition: 3 layers in both prescriptions. The devil, of course, is in the details.

Juniper's Infranet:
A quick summary of the Infranet approach, available on the Infranet web site, describes it in 3 layers: signaling stratum, control stratum and data stratum.

Cisco's NGN:
Cisco describes its solution in terms of application convergence, service convergence and network convergence.

Apart from the innocuous equivalence of the 3 layers in either approach, a fundamental difference between the two approaches seems to be in the use of basic IP connectivity to accomplish future services off the "new Internet", be it Cisco's NGN or Juniper's Infranet. Before any kind of a new service can be provided to a subscriber, basic IP connectivity must be present. (The entire world has now gotten used to the ubiquitous nature of IP connectivity; you are too late if you are thinking differently). Thus, it seems that Cisco's idea is superior, particularly if the new ISP will only provide new services in a "container" that a subscriber has specifically requested through a secure request.

The Reformation of the Corporation.

Today, couple of articles caught my attention:

1. IBM investigates the appliance of services science
2. Cisco's Secret Software Strategy

What is interesting in these two articles? That all businesses the world over have to reinvent to deal with the new realities - high-tech manufacturing from China, software outsourcing from India, etc. And, two of the major companies that help transform the business the world over - namely Cisco and IBM, not to speak of Microsoft, Oracle, etc. - are having to reinvent themselves! While doing so, of course, they have to resort to coopetition or else they will step on each other's toes.

What does this reinvention require? Complete modularization of software components that can be stitched together to provide highly customized business process for any enterprise.

Cisco CEO John Chambers said, in January 2004, "We believe that to compete in this environment we're about to go into, with very good competitors from Asia, etc., that our productivity per employee needs to be $700,000," and seems convinced that increasing the productivity of Cisco's workers is the key to Cisco's competing effectively in the global marketplace.

IBM's own services business reinvention is according to, Paul Horn, IBM's Senior Vice President for Research, "If you can think about your company as a collection of components, then you can re-engineer and optimise them. You don't have to have a four-year ERP job with an uncertain return, you can model the pieces in a simple way will make your returns much higher. It is the start of a revolution in how the whole software and services industry is going to deliver value. It is probably the biggest change in the IT industry, maybe ever. ... It's a big change for us and a critical change in the way IBM thinks about itself. We use technology to provide value to customers so that they don't have to outsource their business to the lowest labour cost in the world, because they're generating huge amounts of value."

The upshot of this posting? I wonder how many U.S. companies are thinking this radically?

City of San Jose and Cisco Systems

Today's news item regarding collusion between the city of San Jose and Cisco Systems makes for interesting reading. Although I am only a bystander to this story, it seems like this may not be a case of collusion. Rather, some uninformed individual or individuals must have retained Cisco's professional services group to help them out thinking that "nobody got fired for using Cisco" ... I can't believe any corporation, particularly one as business savvy as Cisco, would rig up a solution like the way the article suggests, that there was a collusion. It is interesting, however, to watch the audit report when it comes out tomorrow.

Networking Giants and the Stock Market

The sentiments of the investing public are a bit hard to fathom. Both Cisco and Juniper produced good quarterly results. But, Cisco has taken a nearly 20% beating from its high of $29.39 of Jan. 20 to today's $23.68 and Juniper has fallen to today's close of $25.95 from a high $31.25 on Jan. 20, a loss of 17%. I guess good results brings out the sellers.