News.com looks back and ahead:
To chase new growth, however, Cisco has been progressively forced to forage outside the corporate networking market it dominates, into the highly competitive carrier market and the risky, lower margin consumer market.
Over the next few years, large telephone companies around the world are expected to build out huge IP networks to support broadband and new services like IP telephony and IP video. The market is expected to surge about 20 percent a year, nearly twice that of the corporate market, which is where Cisco has traditionally made its money.
Analysts have said that this new market offers Cisco one of its best chances to meet growth targets of 10 percent to 15 percent a year over the next three years–projections that the company reiterated this week at its annual analysts conference on its sprawling San Jose, Calif., campus.
“The carrier market is key for Cisco,” said Dave Passmore, an analyst with the Burton Group. “There’s tremendous upside here. This is the only market that they don’t have to dominate, and they can still find some significant growth.”
n its effort to find the “next big thing,” Cisco has already earmarked a separate category of products it calls the Advanced Technology Group. So far, Cisco has identified six new technologies for this group–security, IP telephony, wireless, storage, optical and home networking–each of which it hopes to grow into a $1 billion business.
In aggregate, these technologies make up a relatively small proportion of Cisco’s revenues. But they’re growing. In the fourth quarter of fiscal 2004, Advanced Technologies made up about 16 percent of the company’s overall revenue, up from 5 percent in 2003. Cisco isn’t stopping with these six. Chambers says he hopes to add at least another six.