Cisco 2012 Annual Report Download - page 33

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For additional information regarding our purchase commitments with contract manufacturers and suppliers, see
Note 12 to the Consolidated Financial Statements contained in this report.
WE DEPEND UPON THE DEVELOPMENT OF NEW PRODUCTS AND ENHANCEMENTS TO
EXISTING PRODUCTS, AND IF WE FAIL TO PREDICT AND RESPOND TO EMERGING
TECHNOLOGICAL TRENDS AND CUSTOMERS’ CHANGING NEEDS, OUR OPERATING
RESULTS AND MARKET SHARE MAY SUFFER
The markets for our products are characterized by rapidly changing technology, evolving industry standards, new
product introductions, and evolving methods of building and operating networks. Our operating results depend
on our ability to develop and introduce new products into existing and emerging markets and to reduce the
production costs of existing products. We believe the industry is evolving to enable personal and business
process collaboration enabled by networked technologies. As such, many of our strategic initiatives and
investments are aimed at meeting the requirements that a network capable of multiple-party, collaborative
interaction would demand, and the investments we have made and our architectural approach are designed to
enable the increased use of the network as the platform for all forms of communications and IT. For example, in
fiscal 2009 we launched our Cisco Unified Computing System, our next-generation enterprise data center
platform architected to unite computing, network, storage access, and virtualization resources in a single system,
which is designed to address the fundamental transformation occurring in the enterprise data center. Cisco
Unified Computing System is one of several priorities on which we are focusing resources. Another example of a
market transition we are focusing on is the move towards more programmable, flexible and virtual networks. In
our view, this evolution is in its very early stages, and we believe the successful products and solutions in this
market will combine ASICs, hardware, and software elements together.
The process of developing new technology, including technology related to more programmable, flexible and
virtual networks, is complex and uncertain, and if we fail to accurately predict customers’ changing needs and
emerging technological trends our business could be harmed. We must commit significant resources, including
the investments we have been making in our priorities to developing new products before knowing whether our
investments will result in products the market will accept. In particular, if our model of the evolution of
networking to collaborative systems does not emerge as we believe it will, or if the industry does not evolve as
we believe it will, or if our strategy for addressing this evolution is not successful, many of our strategic
initiatives and investments may be of no or limited value. For example, if we do not introduce products related to
network programmability, such as software-defined-networking products, in a timely fashion, or if product
offerings in this market that ultimately succeed are based on technology, or an approach to technology, that
differs from ours, our business could be harmed. Furthermore, we may not execute successfully on our vision
because of challenges with regard to product planning and timing, technical hurdles that we fail to overcome in a
timely fashion, or a lack of appropriate resources. This could result in competitors, some of which may also be
our strategic alliance partners, providing those solutions before we do and loss of market share, net sales, and
earnings. The success of new products depends on several factors, including proper new product definition,
component costs, timely completion and introduction of these products, differentiation of new products from
those of our competitors, and market acceptance of these products. There can be no assurance that we will
successfully identify new product opportunities, develop and bring new products to market in a timely manner, or
achieve market acceptance of our products or that products and technologies developed by others will not render
our products or technologies obsolete or noncompetitive. The products and technologies in our newer product
categories such as Data Center and Collaboration as well as those in our Other Products category that we identify
as “emerging technologies” may not prove to have the market success we anticipate, and we may not
successfully identify and invest in other emerging or new products.
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