John Chambers said Cisco will continue to invest in emerging markets, even as regions like the United States and Europe cut IT spending due to economic problems.
Cisco Systems will look to increase
investmentsincluding in emerging marketsand grow market share in key sectors
despite the uncertain global economy, according to Chairman and CEO John
Chambers.
The networking giant this week showed off
some of that investment, announcing June 20 an expansion of a year-old program
in Israel called Maantech that Chambers said will create
12,000 high-tech jobs for Arabs in Israel over the next four years and
hopefully close the economic gap between that countrys Arabs and Jews.
In a taped interview
with CNBC from the International Economic Forum in Russia, Chambers said
such investments were important to Ciscos efforts to become a larger IT
solutions player, and also part of the companys efforts to grow at a time when
competitors may be considering cutting costs due to the troubled economies in
places like Europe, India and the United States.
Chambers argued that companies can grow
market share in down economies or right when things begin to start on the
upswing, and that when we see things starting to slow in an area, that's
actually when we may invest more aggressively.
"We see the emerging economies not only
as being able to grow two to three times faster than our traditional business,
but we see them as an opportunity for us to begin to talk about, how do you
change the whole economy, he said in the CNBC interview. Instead of selling
routers and switcheswhich I love to doyou suddenly say, How can we do job
creation? How do you do inclusion of the entire population? How do you change
health care?"
Emerging markets will continue to be
important, Chambers said. About 20 percent of the companys revenue comes from
such regions, and at the current trajectory, that should grow to about 30
percent soon, he said. Cisco has been investing in Russia for the past three
years, Palestine for four and China for 10, according to Chambers. During that
time, the companys business in Russia has grown 50 percent, and in the early
part of this year, that growth has continued in the high teens.
For its part, China is looking to use IT to
improve its health care and educational systems, he said.
What this means for Cisco is more business
and greater market share growth, all helping fuel a transformation in the
company, Chambers said.
Our role should change from being a, quote,
telecommunications company to potentiallyand its a stretch to get thereto be
the top IT company who helps them solve their goals, he said.
Chambers in the past has talked about
investment during down economies. During the global recession several years
ago, Cisco aggressively looked to expand into almost three-dozen new markets,
such as consumer technologies. However, the company last year drastically
scaled back those efforts in a restructuring
that included about 3,000 job cuts and closures of underperforming businesses,
including many of their consumer products. Instead, Cisco is focusing on five
priorities, including cloud, core routing and switching, and the data center.
The move has worked, Chambers said. Market
share in routerswhich was falling before the restructuringis up 7 percentage
points, and Cisco has more than 70 percent share in the switching market. The
company also is seeing growth in markets such as data
center technology and set-top boxes.
Emerging markets will be keys to continuing
the growth, he said, and also will help lessen any blows the company might feel
from problems in other regions, particularly developed markets like Europe and
the United States, where governments are cutting back on IT spending as they
try to work their way out of severe budget problems.
Chambers said reductions in IT spending will
hamper these countries abilities to improve in such areas as health care,
education, security and defense, and could make recovery even more difficult.
I would argue that governments around the
world, if they don't invest in IT, aren't going to be able to work their way
out of this," he said. I think developed countries will have to change.
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