Mark Fabbi

1
Cisco Has the Star Lost Its Shine?

• Mark Fabbi

2
Conclusions

• Despite recent market cap decreases, Cisco is
  still the most dominant vendor in enterprise
  networking and the most financially healthy
  vendor in the overall network equipment market.
• Cisco has created an aura around its brand,
  resulting in a cult status among enterprise
  technical staff and a growing fan club in
  enterprise senior management ranks.
• Cisco will continue to dominate enterprise data,
  but struggle to gain traction in other markets.
• To receive competitive pricing from Cisco,
  enterprises must understand changing market
  dynamics, present upside opportunity for Cisco
  and seriously consider competitive alternatives.

3
Ciscos New Corporate Structure Spotlight on
Opportunity
James Richardson Chief Marketing Officer
Corporate Marketing
Commercial
Service Provider
Enterprise
Technology Marketing
Internal Technology Focus
External Messaging
4
Cisco Financials So Why the Big Drop?
Normalized Revenue
1.20
1.00
Enterprise Vendors (-11 percent)
0.80
Cisco (-25 percent overall -20 percent
enterprise -43 percent service provider)
Service Provider Vendors (-34 percent)
0.60
3Q00
4Q00
1Q01
2Q01
5
Cisco Financial Forecast The Long Road Back
Year Over Year Change
( in Billions)
80
40
60
30
40
20
20
0
12.8 Billion Reserve
-20
10
-40
0
-60
1998
1999
2000
2001
2002
2003
2004
2005
2006
6
E-Business Poster Child Web-Based System
Overview
2000
ManufacturingConnectionOnline
Customers
Cisco Employee Connection
CiscoConnectionOnline
Distributors
Suppliers
Partners
ContractManufacturers
Business Unit Intranets
Analysts
2003
Customer A
Supplier A
Customer B
Supplier B
CCO
Cisco MCO
.


Customer Z
Supplier Z
7
Cisco Marketing Creating the Aura
8
Cisco Solutions From Strategic Partners to
Ecosystems
9
Training the Masses Marching to the Cisco Drum
6,557 CCIEs
135,000 enrolled
10
Acquisition Strategy Then and Now
23
25
Cisco Acquisitions
18
20
15
9
10
7
6
4
3
5
2
1
0
2003
1993
1995
1997
1999
2001
Security
Enterprise Voice
Enterprise Switching
Voice Applications
Wireless
WAN Access
Storage Networking
Network Mgmt
VPN
Enterprise
Content Manipulation
Content Delivery
Voice Protocols
Service Provider
Voice Operations
Carrier SONET Routing
Carrier ATMSwitching
OSS Middleware
Unified Messaging
IntelligentOptical
Carrier Access
Optical
11
Cisco Product Opportunities Financial Realities
Addressable Market Est. Mkt.
Growth Market Share Revenue Prospects (2000
in Billions) (2000) (C2000) (short/long
term) Enterprise Switching 15.0 67 10.0 - /
Enterprise Routing 8.7 87 7.6 - / - Enterprise
Voice 20.0 1 0.2 flat Internet/SP
Routing 2.7 65 1.8 - / Multiservice
Switching 5.6 18 1.0 - / - Access
(RAS,CMTS,DSL) 12.5 20 2.5 - / Optical
32.0 3 0.8 /
Source Gartner Research
12
Ciscos Product Portfolio Blanketing the Market
13
Cisco and Voice The Road to Revenue?
Market Share /
Ciscos marketexpectations
Gartners forecast for Cisco market share
Ciscos influence in voice market
time
2006
2001
14
Cisco in the Service Provider Just One of Many
Options
Voice Data Video Storage
?
NetworkResources
AccessDevice
CPN Today
?
?
?
15
Cisco Software Initiatives Making the Network
Relevant
Cisco AVVID Architecture
BusinessRelevance
IPCC
Messaging
Conferencing
SoftwareProducts
Applications
Personal Assistant
IPCC
Call Manager
Net Mgmt
Voice SDK
NetworkIntelligence
Media Gateways
Middleware
CTE
Directory Services
NetworkInfrastructure
Switching
Plumbing
Infrastructure
Routing
Clients
SoftwarePlatforms
User Impact
16
Enterprise Infrastructure Still No. 1
Challengers
Leaders
Cisco
Ability to Execute
Nortel Networks
Enterasys
Alcatel
Extreme
Avaya
Foundry
3Com
HP
Arrows indicate the trend during 2H01
As of 3/01
Niche Players
Visionaries
Completeness of Vision
17
Cisco Negotiating Whats an Enterprise to Do?
Losing Discount Control
1995
2001
Discount
Discount
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ContractVolume
ContractVolume
0
0
Typical Cisco Discount
Increased Perception of Competition Greater
Discounts
35
30
25
1995
1998
2001
18
Cisco Targeted Pricing Return to Stealth Sales
Strategies
2001 to 2004
1998 to 2001
Technology Migration Program Competitive
Migration Incentives - apply to all customers
(that ask) - apply to all channels
Targeted Sales Campaigns - on markets - on
competitors - key accounts
19
Cisco Vendor Overall Rating Positive (As of
10/01)
2001 Strong Positive Positive Negative Pos
itive Positive Negative Negative Strong
Positive Positive
2006 (0.8 probability) Strong
Positive Positive Positive Negative Positive
Negative Negative Positive Positive
Initiatives Infrastructure Voice Storage
Networking Multiservice Switching (IP)
Infrastructure Optical Infrastructure Access
Creating the Aura Overall Cisco Rating
Enterprise
Service Provider
Corporate
The evaluation scale is based on Gartners
assessment of the vendors vision and execution
for a product or service, relative to Gartners
analysis of clients requirements. It is not
intended as a comparison relative to competitors
in the market.