Networking giant Cisco Systems Inc, the largest datacommunications equipment vendor in the world having grown explosively by a series of diverse acquisitions over the last few years, is now moving into the last sector of the datacoms market it doesn’t compete in, consumer networking products. Chief Executive Officer John Chambers declared the company is changing its strategy, effective from mid way through next year, but he hasn’t discussed what he is going to do to make his vision come true. The Cisco press apparatus is rapidly trying to talk down the significance of the revelation, implying that either Chambers is steamrollering the board, or he is talking a long term strategy and has left the company is in an embarrassing hiatus, left without concrete plans to discuss. Cisco can cobble together some of the technology from its multiple takeovers , its got Telebit Corp for ISDN equipment, and Dagaz Technologies Inc and Telesend Inc, for Digital Subscriber Line technology . It has grown to its enormous yearly revenues of $6.44bn and $1.05bn profit, by a series of acquisitions, but hasn’t managed to buy itself consumer sales channels- it sells mainly into corporates and telcos at the moment- so its going to have difficulty starting off in consumer orientated business, and maintains that it needs to be number one or two in any business. The change is going to cause a shift in the way Cisco does business as it is won’t be able to continue raking in the 65% gross margins it has held onto from its origins selling routers. The obvious parallel for Cisco at this stage is that of IBM Corp, which grew up in the high margin mainframe business, and never managed make the transition to the low margin PC world.
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