Cisco's Message: Time Will Tell

Time will tell.

Analyst conferences are designed to convince the people who cover big, public companies that all is well and that plenty of exciting new products and services will be coming down the pike in the coming year. Analysts attend such shows to get a one-year road map of the companies' plans. Journalists attend to try and cajole the companies' executives, almost always unsuccessfully, to spill the beans on something they wanted to keep secret. (And for the free food, which didn't disappoint: A delicious teriyaki steak and salmon combo followed by an obscenely rich crème brûlee in a molded chocolate cup. Kudos.)

The problem is, specific announcements about newsworthy things are few and far between at such events. Cisco's was no exception. There were a handful of next-version product notices, but nothing to stop the presses about. And there were plenty of broad hints that were interesting, but not earthshaking. Of special interest to VARs was VP of worldwide channels Paul Mountford's comment,made during a QandA session,that the company is selling more and more of its routers and switches with services contracts attached, rather than simply as standalone boxes. That could help some VARs realize a continual revenue stream instead of just a one-time payment. But for any VARs who would like to get into the services business themselves, it could position Cisco as a competitor down the road.

The big news, to Cisco's chagrin, was made the day before the conference, when an analyst from Toronto-based RBC Capital Markets downgraded Cisco's stock from "outperform" to "sector perform." The analyst, John Wilson, argued that the delay in an economic recovery and companies' buying less expensive Cisco products would keep the networking titan from beating last year's revenue numbers over the next few quarters.

None of this fazed John Chambers, who kicked off the show with a lively 90-minute keynote speech that highlighted,in mission-statement terms rather than product specifics,Cisco's outlook for 2003. The ever-upbeat CEO predicted an industry recovery without attaching an arrival date to it. These days, who would? But his enthusiasm is infectious. Chambers is so irrepressibly genial that when he spoke of the recent economic woes as a "100-year flood," he made it sound like nothing more insurmountable than an off-week or two. He did acknowledge that Cisco had fallen short of some of its earlier projections, but stressed the company's strong overall customer-satisfaction ratings.

His big announcement was of a new Cisco vision, called the Intelligent Information Network, describing it as "a unifying system underlying any organization's effort to integrate information technology, business processes and applications." Properly implemented, this infrastructure would help lower costs, integrate systems and improve performance. With the help of someone who evidently was a Seal Beach, Calif., police officer but had the poise and stage presence of an actor,hmmm,Chambers demonstrated one implementation of this vision, a networked system that wirelessly links together businesses, patrol cars and even individual officers with the local police station. The demo showed how police could visually monitor businesses for signs of trouble,in this case, a staged bank robbery,or follow patrol officers around as they make traffic stops and use auto-mounted computers to get immediate information on possible lawbreakers. It was an impressive example of the power and reach of wireless computing, one that should have law enforcement, businesses and the ACLU licking their chops.

Later at lunch, Cisco executives (other than Chambers) sat with attending journalists to engage in roundtable discussions about whatever topics arose. My table's host was Cisco VP and GM of switching systems Charlie Giancarlo, so the talk mostly centered on what the future holds for that technology. (Summary: Switching's not just for the edge anymore.) Echoing what Chambers mentioned in his talk, Giancarlo broadly hinted at Cisco's next likely acquisition targets.

This is a game Cisco has played with the press for years. The company line says, "Cisco doesn't comment on future acquisitions or on products that are more than 90 days from release." But Cisco execs, starting with Chambers, are more than happy to outline the specific criteria they use to target market sectors. He half-jokingly acknowledged that Cisco always seems to buy companies in threes, then said that it currently had only one storage and no services companies in the fold. He also said the company uses factors, including a shared vision for the sector in question, complementary cultures and geographical proximity, to help decide which companies to swallow up. Making the Intelligent Information Network a reality will require, among other things, robust storage and a comprehensive services infrastructure. So all you small-to-midsize storage and services companies who agree with Cisco's plans and reside anywhere near a Cisco office: Look busy.

One thing no one explained was how the concept of an Intelligent Information Network is markedly different from what absolutely everyone has been trying to accomplish since the Internet became the dominant focus of the enterprise. The idea of building secure, robust networks that link together partners, customers and consumers, lowering costs while streamlining processes, has been on the mother of all to-do lists for years. Cisco is arguing that the time and technology to make this happen is nigh. Sure, it probably will happen one day, but given economic conditions, global uncertainty and resistance from parties and factors known and still unknown, is the realization of this vision really that imminent? Time will tell.