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Cisco plans for
China
BEIJING - President
and chief executive officer of Cisco Systems John Chambers, 56, speaks
very quickly. Addressing a group of Asian
journalists early this month at the company's
headquarters in San Jose, California, even the
simultaneous interpreter often failed to follow
his West Virginia accent, prompting complaints
from Chinese journalists that they were missing
key points on business strategies. Chambers
claimed he was speaking at his slowest speed.
Chambers' actions speak as fast as his
words. Cisco, the world's largest computer network
equipment maker, finished its 100th acquisition
early this month. The deals were done within 10
years of Chambers' taking over as CEO in 1995. In
2004, Cisco's revenue increased to US$22 billion,
from just $1.2 billion in 1995.
"Acquisition is ongoing," Chambers said.
"We believe acquisition is an effective way to
grow. Cisco has been entering new markets through
acquisitions. It will continue to seek new
investment opportunities. It will get the best
companies to acquire and attract the best talent,"
he said.
Chambers thinks
highly of the Asian-Pacific region. "The Asia-Pacific region
has been our fastest growing market," he said. A
large part of Cisco's manufacturing comes from
Asia. Chambers claimed that many of his partners
have said his behavior and style are somewhat Asian.
At Cisco's headquarters, 60% of the staff have
Asian backgrounds. Within the Asia-Pacific region,
China, the most populous country in the world, has
a great information technology (IT) education system, indicating a huge
potential for investment and personnel, Chambers
said. He has a special interest in China, having
done business here for two decades. "If I wasn't
American, I would be Chinese."
Cisco's latest moves in
China include opening a Urumqi representative office and
expanding the Shanghai research and development
center this month. The Shanghai center will
start with the telecom sector and expand to
other areas in future. Built at a cost of $32
million, it is recruiting around 100 Chinese engineers to
work better in the local market and cut
costs. "Labor is a very challenging issue. Through the
R&D [research and development] center in Shanghai, we
hope to have a better situation for labor costs in
China," said Mike Volpi, Cisco's senior vice
president. "The most important thing in IT is not
technology; but the people, the process." That is
why Cisco has established around 200 networking
academies around the country in cooperation with
Chinese universities. These academies provide
online and offline programs that have trained
thousands of Internet professionals.
Cisco
entered China 11 years ago. So far it has invested
in six Chinese companies, including the
Shanghai-based Shanda Interactive Entertainment,
the biggest Chinese online game operator. All
Cisco's acquisitions in China are made through the
Softbank Asia Infrastructure Fund, set up by Cisco
and Japan's Softbank. "Our investment returns from
China are better than those from America,"
Chambers said.
Cisco, with routers and
switches as its core products, faces challenges
from major Chinese companies like Huawei
Technologies and ZTE Corporation, which are
quickly expanding in both domestic and overseas
markets, with cheaper products. "We don't have an
architecture business competitor; competition
comes from one or two products, and competition
varies by market," Chambers said. Cisco routers
have competitors in China like Huawei and ZTE, but
"we don't compete much", said Volpi, who is also
the general manager of Cisco's Routing Technology
Group. Cisco has 70% of the market share in
routers globally, he said. Volpi also ruled out
the possibility of Cisco buying Huawei.
The company is expected to manufacture 40%
of its products in China in the coming years to
cut costs. All Cisco's products are produced
through outsourcing. "China's economy is
developing rapidly, we hope it will continue to
develop, and people will pay more for our
products," Volpi said. Cisco will aim to educate
customers and improve distribution channels in
China, he said.
Cisco has expanded from
routing and switching to six new fields: IP
(Internet protocol) telephony, storage, security,
wireless, home networking and optical networks.
"More boxes, more problems; fewer boxes, fewer
problems," Volpi said, when queried as to why
Cisco is pursuing new technologies and products.
The company is making efforts to put different
products in one network.
"What do
customers want today? An integrated network," said
Charles Giancarlo, Cisco's senior vice president
and chief technology officer. "It's not only cost
saving, but also provides services very quickly."
One network combining many uses, allowing the
customer to realize the virtualization of
resources and services: this is Cisco's blueprint
for an intelligent information network in the
coming three to five years.
Cisco also has
branches in Beijing, Shanghai, Guangzhou and
Chengdu. It has set up representative offices in
Nanjing, Xi'an, Shenzhen and Urumqi.
(Asia
Pulse/XIC) |
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