Cisco 2012 Annual Report Download - page 10

As part of our business focus on the network as the platform for all forms of communications and IT, our
products and services are designed to help our customers use technology to address their business imperatives
and opportunities—improving productivity and user experience, reducing costs, and gaining a competitive
advantage—and to help them connect more effectively with their key stakeholders, including their customers,
prospects, business partners, suppliers, and employees. We deliver networking products and solutions designed to
simplify and secure customers’ network infrastructures. We also deliver products and solutions that leverage the
network to most effectively address market transitions and customer requirements—including in recent periods,
virtualization, cloud, collaboration, and video. We believe that integrating multiple network services into and
across our products helps our customers reduce their operational complexity, increase their agility and reduce
their total cost of network ownership. As a result of the re-categorization of our product offerings in fiscal 2012,
our products and technologies are grouped into the following categories: Switching, Next-Generation Network
(“NGN”) Routing, Collaboration, Service Provider Video, Wireless, Security, Data Center, and Other Products.
In fiscal 2011, our product categories consisted of Routing, Switching, New Products, and Other Products.
Network architectures, built on core routing and switching technologies, are evolving to accommodate the
demands of increasing numbers of users, network applications and new network-related markets. These new
markets are a natural extension of our core business and have emerged as the network has become the platform
for provisioning, integrating and delivering an ever-increasing array of IT-based products and services.
Strategy and Focus Areas
We began in fiscal 2011, and had largely completed by the end of fiscal 2012, realigning our sales, services and
engineering organizations in order to simplify our operating model, drive faster innovation, and focus on our five
foundational priorities:
• Leadership in our core business (routing, switching, and associated services) which includes
comprehensive security and mobility solutions
• Collaboration
• Data center virtualization and cloud
• Video
• Architectures for business transformation
We believe that focusing on these priorities best positions us to continue to expand our share of our customers’
information technology spending.
We continue to undergo product transitions in our core business, including the introduction of next-generation
products with higher price performance and architectural advantages compared with both our prior generation of
products and the product offerings of our competitors. We believe that many of these product transitions are
gaining momentum based on the strong year-over-year product revenue growth across these next-generation
product families. We believe that our strategy and our ability to innovate and execute may enable us to improve
our relative competitive position in many of our product areas even in uncertain or difficult business conditions
and, therefore, may continue to provide us with long-term growth opportunities. However, we believe that these
newly introduced products may continue to negatively impact product gross margins, which we are currently
striving to address through various initiatives including value engineering, effective supply chain management,
and delivering greater customer value through offers that include hardware, software, and services.
We continue to seek to capitalize on market transitions. Market transitions relating to the network are becoming,
in our view, more significant as intelligent networks have moved from being a mere cost center issue—that is,
where the focus is on reducing network operating costs and increasing network-related productivity—to
becoming, additionally and increasingly, a platform for improved revenue generation as well as driving business
agility and strategy execution.
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