Big Cis hits the top
2000-03-28
Well, Cisco Systems have done it and suddenly hardware is ruling the roost again. The company’s market valuation rose yesterday to $555 billion, overtaking Microsoft which fell to $541 billion. For a company that has not been known for grabbing the spotlight, this really is quite a coup.
Cisco has, in a way, been the poor nephew in what is a very rich family. Certain companies caught the technology wave of the eighties and nineties and left their compatriots behind. Here we are not talking about the Oracles and Suns, although such companies have done exceedingly well in their own areas. There are a handful of firms which have become the de facto standard, and they have done it globally. These are Microsoft, Intel and, well, Cisco.
While it is easy to spot why Microsoft and Intel did so well, riding on the back of an IBM PC clone which undercut the young and arrogant Apple, the picture for Cisco is more hazy. Once there were many vendors of networking equipment, but despite the best efforts of the competition one rose up above the rest. It is difficult to say why this was – probabilities point towards the company’s early realisation that it was not selling equipment, but infrastructures. However it happened, Cisco has grown and grown its market share by continually developing its products and moving with the flow. Unlike most other networking companies, it has not grown through mergers, rather it has favoured stringing acquisitions of smaller companies, buying key technologies and expertise rather than direct market share. This strategy has clearly worked.
Cisco has seen its biggest rivals merge and merge again, to no avail. Back in 1994, Synoptics and Wellfleet merged to form Bay Networks and “give Cisco a rival,” according to a San Jose Mercury News article of the time. In 1998 Bay and Nortel then got together, ostensibly to challenge Cisco. They’re still at it - recently Nortel Networks made an \link{http://www.it-analysis.com/99-11-10-2.html?its,announcement} which, threatened the company, would bring Cisco to its knees. Of course, it didn’t. Cisco overtook the second most valuable country in the world, General Electric, a few weeks ago and now it has overtaken Bill Gates’ empire.
What is perhaps the most remarkable is that Cisco has grown into a leader not only in networking but in telecommunications, a market which is not known for sharing business. The company’s technology-agnostic stance is a key driver to this: the problem to be solved may be the unrelenting growth of the internet, but the solutions are legion – be it LAN or WAN, the best technology wins and no option is ruled out, be it ATM, frame relay, xDSL, or Ethernet to name a few. This approach has kept the company flexible, enabling it to grow into new markets through its reputation in networking. As the world goes IP, the world is choosing Cisco.
Where now for the world’s most valuable company? Onward and upward is the answer. The desire for infrastructure is speeding up rather than slowing and at least for the next couple of years, new developments are bringing new challenges which Cisco will be priming itself to exploit. The rise of mobile may open some chinks in the company’s architecture, which will be interesting to watch but there is plenty of growth in big Cis yet.
(First published 28 March 2000)