Cisco 2008 Annual Report Download - page 9

2008 Annual Report 1312 Cisco Systems, Inc.
STRATEGY
VISION
EXECUTION
Capturing Market Transitions
We believe that Cisco’s success also comes from recognizing and capitalizing on
market transitions before they occur. Our goal is to capture these market transitions faster than our
competitors by recognizing major technologies and markets that will play a crucial role in the future
of communications and IT. By setting our sights on a minimum three- to five-year horizon for innova-
tion and development, we are able to make strategic decisions, investments, and organizational
moves to support the future. Acting on this differentiated strategy, we made multiple acquisitions
in fiscal 2008, including wireless, unified communications, and security technologies. Look for us
to continue to grow through internal development, acquisitions, our global partnerships, and cross-
functional teamwork.
One area of our differentiated strategy includes a goal of growing each product category in our
advanced technologies to capture $1 billion-plus in annual revenue and the number-one market
position. As an example, Cisco TelePresence—one of our “emerging technology” products—is
beginning to gain meaningful adoption in the enterprise and service provider customer segments.
On many occasions, we have observed that when our customers experience the power of this
technology, their reaction proceeds from “wow” to “I want to have it now.” Our customers have
begun to understand firsthand the power they can gain by implementing video and visual
networking solutions in their corporate network ecosystem.
Cisco grew revenue across all product categories and geographic theaters in fiscal 2008. Routing
revenue increased 14%, led by 119% revenue growth in our Cisco CRS-1 Carrier Routing System
product line. Our switching portfolio revenue grew 7%, consistent with slower enterprise business
growth in the United States and Canada, our largest theater. Revenue growth in our advanced
technology product category was 21%, led by Unified Communications revenue growth of 51%,
including WebEx. Our four largest geographic theaters demonstrated solid growth in fiscal 2008
despite certain areas of economic challenge.
Providing customer satisfaction is one of Cisco’s core values. Creating sustainable customer partner-
ships is a crucial part of our strategy and provides invaluable insight into market transitions. In addition
to our technology, Cisco’s knowledge of government, education, healthcare, public safety, economic
development, and national security issues has increased customer trust in our presence at the core
of their networks. Being close to our customers is, we believe, the best way to uncover opportunity for
the next market transition, long before the next market transition becomes obvious to others.
A Portfolio Management Approach
Our market leadership is based on a balanced portfolio of products and services that
address the technology and business requirements of our customers around the world. Cisco
products, applications, and solutions offer an architecture advantage by which customers can
structure, customize, and deploy complex IT and communications systems that have the oppor-
tunity to grow with their business. Our product portfolio is built on a scalable open architecture
with technology that delivers real value to customers.
We are proud of our fiscal 2008 financial performance. Revenue was a record $39.5 billion, an
increase of 13% year over year. Especially notable, Cisco achieved the first $10 billion quarter
during the fourth quarter of fiscal 2008, despite a particularly challenging global economy
during the second half of fiscal 2008. For fiscal 2008, revenue growth for our products
Letter to Shareholders >
The Network as the Platform
The network is squarely at the center of innovation and is capable of changing the way
people work, live, play, and learn. The rapid proliferation of Internet-enabled devices is fueled
by more and more services and tasks being handled online, from phone calls to personalized
searches to downloading videos, games, and other forms of entertainment.
The role of the network has evolved beyond that of infrastructure to a secure platform for delivering
the customized and personalized experience that 21st-century users expect—whether that means
delivering new services as a carrier; boosting productivity for businesses of any size; or consumers
looking for real-time, personalized entertainment and services. Our vision of tomorrow’s network is
one of abundant bandwidth; exciting collaboration models; sophisticated yet easy-to-deploy solu-
tions; and the convergence of voice, data, and video on every device.
Advancing the visionary change for tomorrow’s network requires major investment. Cisco
invested $5.2 billion in research and development during fiscal 2008. This commitment expands
the breadth of products, applications, and services that we offer, which we believe will enable our
customers and partners to reach the next level of innovation with their customers and partners.
Customers tell us that we have earned our competitive advantage because we actively listen, share,
and explore ways to innovate with them in order to develop the best solutions to meet their needs.
Innovation is at the foundation of Cisco culture. In fiscal 2008, we brought more than 250 new
products to market, including the Cisco Nexus switches and the aggregation services routers.
Cisco TelePresence systems continue to gain market share and exemplify the power of the
network to change business models and improve visual communications across geographic and
cultural boundaries. At Cisco, we believe that companies that build business models on collaboration
enabled by networked IT will gain recognizable competitive advantages. Many of our customers
have begun to recognize the power of Web 2.0 technologies to allow quick, safe, and effective
interaction across devices, operating systems, wired and wireless networks, and business
applications around the world.
Letter to Shareholders >
TO OUR SHAREHOLDERS
All around the world, people are accomplishing extraordinary things
with the power of the network. Today’s executives are meeting face
to face without ever leaving their desks. Consumers are able to
experience the action of and connect with a favorite sports team or
music group without leaving their home. Classrooms and students are
connected regardless of geography, nationality, or culture. The human
network is changing the way we bring big ideas to life—and share
them with the world.
STRATEGY
VISION