21.53

Average CSCO stock week of November 30th:

23.68

Percentage change: 9.5% change

To say the least, Cisco has a very complex supply chain system. For its 200 product families, Cisco purchases about 500,000 parts every year from over 600 suppliers. These suppliers or partners provide everything from test, design, and logistic management services. To manage all of these details, supply chain management is an ongoing process at a company as large as Cisco.

(^http://www.supplychain.cn/attachments/wysiwyg/2527/supply_chain.gif)

It is interesting that Cisco deliberately associates its supply chain management policies with its commitment to social responsibility Cisco supports the Electronics Industry Code of Conduct (EICC), which “promotes an industry code of conduct for global electronics supply chains to improve working and environmental conditions”. Cisco also supports the Global e-Sustainability Initiative, which is “dedicated to information and communication technologies (ICT) sustainability through innovation”.

Cisco also takes these commitments to working and environmental conditions a step further, by implementing the Cisco Supplier Code of Conduct, which follows the EICC guidelines but also includes additional requirements.  The procedure involves risk assessment of each supplier facility, review of the systems for those facilities that are identified as being most at risk, a process for conducting third-party facility audits, and a corrective action program.

After having partnered with a supplier, Cisco conducts quarterly business reviews of the suppliers’ business activities, financial stability, engineering practices, and quality procedures.

In 2007, Cisco participated in special Joint Pilot Audits, which had third parties audit Cisco facilities in China, and focused on the “labor, environmental, health, safety, ethics, and management system aspects of the code of conduct”. Cisco also frequently requests third party audits of any supplier’s business operations to make sure all suppliers adhere to their Code of Conduct.

Cisco takes diversity into consideration when selecting suppliers. Many of these suppliers are small businesses and contractors, and they provide a wide array of services. Cisco pays attention to three types of diversity: Regional, Cultural, and Social.

Regional diversity allows access to worldwide skills and markets, and provides business resiliency if disruptions occur in a particular region. It also helps reduce transportation costs. Cultural diversity, when suppliers offer different viewpoints and styles of interacting, helps develop and market products that fit the needs of the broad global community, which Cisco strives to serve. Lastly, social diversity promotes inclusiveness, which benefits both communities and local economies.

The Cisco Global Supplier Diversity Business Development (GSDBD) program, established in 1994, was designed to provide equal access to businesses owned by minorities, women, disabled people, and military veterans, as well as to companies in Historically Underutilized Business Zones (HUBzones). Cisco hopes to award 10 percent of their supplier expenditures to such businesses.

Cisco is ranked in the top 50 U.S. companies providing multicultural business opportunities, recognized by 350,000 women- and minority-owned businesses.

[Research from http://www.cisco.com/web/about/ac227/ac333/the-environment/supply-chain.html ]

Employees

Like many high caliber companies, Cisco realizes that it is only as good as its employees. Cisco is dedicated to “attracting and retaining the best and the brightest”.

Cisco has an “Employee Choice” program, which allows new hires to select their manager and the technology on which they will be working. Engaging employees means everyone is more productive and likely to discover innovative solutions to problems. Diversity is also important to Cisco’s employee culture, as well as a strong promotion of balance and wellness. Lastly, Cisco sees the need to help develop leaders at every level – from the lowest level to upper management.

Environment

Cisco is committed to finding solutions for achieving environmental sustainability. It uses Smart Buildings and workspaces, as well as efficient work practices to use less energy. Network sustainability and energy efficient data centers are ways Cisco allows clients and consumers to save energy and work more efficiently as well. Most impressively, Cisco launched its “One Million Acts of Green” campaign- an online community for people who perform “green” acts to connect and share their projects. The website even has a calculator that calculates the impact of each project completed.

This video is the Canadian take of OMAOG, but it’s representative of the work Cisco is trying to do.

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Social Investments

Cisco realizes the importance of building a strong community.

A strong community starts with education. They have developed several initiatives to help students acquire the skills they need. The Networking Academy program delivers ICT training to help improve career and educational opportunities for individuals in communities around the world. Global Education transformation engages multiple stakeholders in a global discussion to create a new paradigm of 21st century learning. Lastly, Cisco partners with NGOs, governments, and private organizations to promote socioeconomic development through education reform in the developing world.

Economic development is also important, and there are several initiatives to improve the well-being of people around the world. The Cisco Impact Cash Grant Program invests in community organizations that align with Cisco’s investment areas of education, economic development, and basic human needs. Cash grants for qualifying organizations are awarded at global, regional, and local levels. They also provide grants to support disaster response and relief. Cisco also donates donate Cisco products to help qualifying community organizations achieve significant gains in productivity, scalability, and cost efficiency through the strategic use of the Internet and related networking technologies. The Cisco Foundation awards strategic grants in support of programs that deliver lasting, measurable impact on a local, national, or global scale. Cisco supports the efforts of community organizations by investing a strategic mix of business expertise, employee engagement, product donations, and cash contributions to help build and strengthen programs that aim to empower underserved communities. Cisco also has a Leadership Fellows program, which allows employees to use their business smarts and Cisco resources to improve other program offerings. Perhaps most importantly, Cisco encourages employees to volunteer at least one day a  year to a community organization.

Lastly, Cisco continues to develop partnerships with organizations seeking to provide basic resources to those who need them – both locally and abroad.

Companies that engage in technology today seem to come in two breeds:

Rookies: There are companies that seem to spontaneously come into existence, to provide a good or service that is still in its developmental stages. The product continues to evolve. This is Cisco.

Veterans: There are older companies that used to engage in older technology that adapt and find ways to embrace new technology, using their name, experience, and resources to continue to grow into consumers’ increased and changing demands. This is Nortel.

Nortel is a big competitor of Cisco. Both deliver network and communications products. Both cater to corporations, small businesses, and single clients. Needless to say, these two companies compete fiercely for business.

As mentioned earlier, one of Cisco’s newest and proudest ventures is the development of telepresence. Check out this advertisement for Cisco’s Telepresence.

http://www.youtube.com/watch?v=cFmQGIgQN1w&feature=pyv

Nortel joining the action of telepresence, too. Here’s Nortel’s telepresence ad.

http://www.youtube.com/watch?v=sHWLjGb_zcs&feature=PlayList&p=DBDE4A582D9A2024&index=4

So how are they different?

As mentioned previously, Cisco became a public company in 1990. Cisco focuses primarily on communications and networks, and even as Cisco expands, its new products still relate to that larger category. Nortel, on the other hand, was founded in 1895 as a telephone manufacturer for Canada. Nortel was incorporated as “Northern Electric and Manufacturing Company Limited”. Over time, Nortel dabbled in manufacturing other appliances and goods. As the market changed, they began moving away from the telephones and manufacturing and toward digital phone service, a precursor to modern global networking.

Like all companies, Cisco has taken a hit during this economic recession.  Even before the start of the current economic recession, however, Nortel was suffering. When it first entered the lucrative network systems market in 1998, it did remarkably well for itself (as did many IT companies) at the time of the dot-com bubble. However, when the bubble burst, so did Nortel – and stocks prices fell from $124 to less than $1. There were management troubles, and executives were accused of fraud and financial mismanagement.

Things continued to go from bad to worse, and although Nortel attempted to conduct business as usual by continuing to expand, the situation did not improve. Ultimately, Nortel filed for Chapter 11 bankruptcy in January 2009. Its individual assets are being auctioned off.

There are a few possible reasons why Cisco has been successful and Nortel has been devastated, despite the similarities in their products.

Most obviously, Nortel was home to many breaches of ethics. Financial fraud seems to be “kryptonite” for business success. The fact that Nortel executives, including the CEO, were even accused of being engaged in corruption implies that the well-being of the company might not have been a priority. Perhaps due in part to its weakness due to all the corruption, the dot-com bust was especially devastating. Nortel was a constantly evolving company, but while some companies managed to “pick themselves up” after the dot-com bust, Nortel did not.

I also speculate that at least part of the reason Nortel failed may have been because it failed to evolve properly. It may not have assimilated into digital global communications territory very gracefully.

Cisco did not have the baggage that Nortel did, with its long past and diverse offerings. It also did not have any apparent breaches of ethics.

Cisco and Nortel directly compete with each other for business.

Check out this advertisement, where Nortel makes the claim that the hardware for their system uses less energy than Cisco’s hardware does.

youtube=http://www.youtube.com/watch?v=4Y3FG1-TxWg&hl=en&fs=1&

Cisco is overtaking Nortel without a doubt. Recently, the organizing committee of the London 2012 Olympics dropped Nortel as the official communications sponsor – and Cisco was chosen as Nortel’s replacement.

This development speaks volumes for the conditions these companies are in.

Nortel is, in a way, Cisco’s older brother. It looks like Cisco is winning the sibling competition.

Stock Price 10/15/09 = opening price: $24.25

Cisco’s Security division of Security seems unusual, considering how Cisco’s business appears to be primarily in communications and networking. However, in Cisco’s typical style, the security services and products are designed to work with one another and are designed with networking technology. Some products available include Security, Physical Security and Building Systems, Virtual Private Networks (VPN), Firewall, and Security Management. Services to correlate with these products include Security Services and Physical Security Services.

Check out this video – it gives a great crash course on how Cisco does security for its clients – internet style. It’s a few years old, but still relevant.

Cisco’s Data Center offers several forms of both physical and intangible data sharing. There is a special emphasis on unifying computer systems, which is the process of combining all of a computer’s processes for simplicity and efficiency. Products include Unified Computing,  Application Networking Services, Storage Networking, Data Center Switches, and Blade Switches. Services include Data Center Services, Unified Computing Services, Data Center Switching Services, Storage Networking Services, Services for Application Networking Services, Application Management Services.

Cisco’s “TechTV” video discusses just how unified computing works. Unfortunately is not available to embed here, but this promo video still features useful sound bites.

Mobility/Wireless by Cisco consists of Wireless, Access Points, Outdoor Wireless, Wireless LAN Controllers, and Service Exchange, as well as Wireless Services, Wireless LAN Services, and Wireless Mobility Services for Service Providers.

This is a training video that simplifies what Cisco’s task is in providing secure wireless. It also describes how wireless works.

NASDAQ stats:

Last Trade: 23.54 Trade Time: Sep 30 Change: 0.24 (1.03%) Prev Close: 23.30 Open: 23.51 Bid: 20.76 x 100 Ask: N/A 1y Target Est: 24.70

Day’s Range: 22.96 - 23.79 52wk Range: 13.61 – 23.87 Volume: 64,480,047 Avg Vol (3m): 49,310,300 Market Cap: 136.28B P/E (ttm): 22.48 EPS (ttm): 1.05 Div & Yield: N/A (N/A)

Cisco’s offerings of products and services fall into five categories: Network Systems; Collaboration, Voice, and Video; Security; Data Center; and Mobility/Wireless products and services. The products and services offered in each category relate closely to one another, and the services offered are designed to be performed on the products Cisco sells. This allows consumers a whole “package” – easy access to both products and support systems.

Network Systems and Collaboration, Voice, and Video are Cisco’s two biggest categories. Network Systems is the “plumbing” Chambers mentions. This is the hardware, software, and know-how necessary to construct networks and transmit data. Collaboration, Voice, and Video is Cisco’s fastest growing category.

For example, within the broader category of Network Systems, Cisco produces physical Routers, Switches, Network Management, Cisco IOS and NX-OS Software, Interfaces and Modules, and Optical Networking. Additionally, Cisco provides services including Network Management Services, Routers and Routing Systems Services, Routing and Switching Services, Server Networking and Virtualization Services, and Carrier Ethernet Services.

(^Cisco Router, http://www.wavecomindo.co.id/cisco_1721.jpg)

Routers remain Cisco’s primary product.

Collaboration, Voice, and Video is how Cisco allows consumers to communicate with the internet in new, innovative ways. Under the category of Collaboration, Voice and Video, Cisco carries products including Voice and Unified Communications, WebEx, TelePresence, Video, Cable and Content Delivery, Service Exchange and Universal Gateways and Access Servers. It provides services including Voice and Unified Communications Services, Video, Cable and Content Delivery Services, TelePresence Services, Broadband Cable Services and Unified Customer Contact Center Services.

Cisco’s novelty product in this category is TelePresence, a form of video conferencing that makes users feel as though they are actually in location.

Earlier this year, Cisco put out this ad for their collaboration products and services:

NASDAQ Stats:

CSCO

Price: 23.39

High: 23.49

Low: 23.16

Volume: 40,431,600

Cisco Systems is a multinational corporation that specializes in networking technology. Its current products include hardware, software, and networking services.

^Cisco Systems Headquarters in San Jose, CA

The company was started when  computer scientists from Stanford University developed the first router. Sandra Lerner and Len Bosack, along with a group of students and faculty, found that the computers at Stanford University were not in any way connected to a larger network. The router they developed allowed the computers to “talk” to each other, or send each other data. In 1984 they started Cisco Systems, named after San Fransisco, where they began their tiny operation. In 1990, Cisco Systems went public.

When asked to describe what exactly Cisco does for the advancement of internet technology, CEO John Chambers described it as a sort of “plumbing” for data. Like a system of pipes that connects water from the plant to households, networking technology is a combination of hardware and software that connects networks of computers together so that information may be passed between them. The routers Cisco develops, as well as the other software it creates, provide the means for information to travel from one network to another, making sure the information gets to the right place. These are the “nuts and bolts” connections that comprise large networks.

Cisco’s upward climb has been truly remarkable. In 1991, just one year after going public, it saw a revenue of $183 million, and its market capitalization reached $1 billion. Less than 20 years after going public, Cisco Systems spans 65,545 employees world wide.

It is also remarkable that while Cisco has been downsizing slightly in light of the current economy, it has replaced General Motors as one of the 30 blue chip companies that make up the Dow Jones Industrial Average in June 2009.

Vital Statistics:

Stock Ticker Symbol: CSCO

Q4 FY09 Revenue: $8.5 Billion

Stock Price: $21.61

^San Francisco’s Golden Gate Bridge

^Cisco Systems Logo

See the resemblance?