Giant computer-network equipment maker Cisco Systems Inc. recently hit a rough patch, as its huge and lucrative U.S. government business declined, its stock price slumped, and its foray into consumer products suffered a setback. But the company is promising to get back on stride, taking advantage of new opportunities in fast-growing developing countries such as India and China.
Cisco's global operations are run by Robert Lloyd, a Canadian who is considered a candidate for the CEO's job once charismatic leader John Chambers decides to retire.
Why has Cisco been struggling recently in North America?
As a result of the expansion of U.S. debt, federal, state and local spending is all under pressure right now. Cisco spent years building our position in the public sector, [and]that business was booming a couple of quarters ago. Last quarter it was down 15 per cent. That's a very major reversal that offsets the other positive things that are happening in some of our [other]markets.
Why did Cisco abandon its consumer product, the Flip camera?
We took a risk on the Flip, and its connections to the network technologies we were delivering. The challenge, we found out, was managing distribution - the retail presence. It is a place where Cisco doesn't have the influence in terms of shelf space or consumer advertising.
[It was a]lesson learned for the company, but we do still think that connections in the home - for smart energy controllers, for a [system]where your phone runs over WiFi instead of over the wireless network - are still very interesting consumer issues. In the future I think you will se us working more with the telecommunications industry to link our technologies to their broadband connections to the home. The logical [consumer]distribution and branding power resides with some of our telecommunications partners.
Is Cisco's new Cius tablet a consumer product?
It is not competing with the iPad. It will be optimized for video and collaborative applications [in business]
What is unique about the Indian market?
The interesting thing about India is that technology is consumed in very different ways than it is here [in North America] The price points are different, and in some areas cost structures are very low. We are working, for example, on the virtual delivery of doctor's visits, using some of our video technology, at a price that we would not believe for health care in the West. I have no doubt some of those innovations will then come back into the more developed markets in Europe and North America, as will the innovative delivery models.
What about China?
China is very different because there is an underlying plan of mass urbanization. You see entire cities of 10 or 20 million people being constructed in years. It makes your head spin. There is a massive amount of opportunity to build new urban infrastructure in ways we hadn't thought possible. We have seen networking technology deployed to underpin the delivery of educational services, health-care services, and transportation services.
They embrace the construct that everything should be connected, and that all of those connections will lead to more sustainable, environmentally capable urban living. [There are]very large opportunities at a scale few other places in the world experience. Obviously Cisco intends to participate in [delivering]those networks.
How hard is it to get a foothold in China?
The Chinese priority is to build indigenous companies to serve their market, and to work with international companies in a way which brings shared returns. Automobile [manufacturing] for example, is entirely based on joint ventures. Cisco does not yet have those kinds of relationships in China. We will need to examine new models that will involve some kind of partnerships.
And now we actually have Chinese [telecommunication equipment]competitors that are looking at expanding around the world. So we believe that in the future we'll see some our strongest competition coming from Chinese companies.
What are the lessons from the collapse of Nortel?
When I was running Cisco Canada, I competed with the two high tech jewels in the country. One was Nortel and one was Newbridge. Neither of them exist today.
Nortel, I think, didn't understand the importance of adjusting to a market transition. The market was moving to IP [Internet Protocol]and I think the company just had too much embedded in the way its technology was successful, and they missed the transition. Newbridge was a different scenario. [They had]an issue of scale and global capabilities. Selling the company to [French telecom giant]Alcatel was a way to answer that dilemma.
How important is it to anticipate technology changes?
Once you miss a market transition, it gets very difficult. Markets are very unforgiving. You have to anticipate those transitions, and you have to act on them three to five years ahead of them coming to the marketplace. We anticipated the transitions that are occurring right now in cloud computing, five years ago. We have technologies that seem purpose-built for cloud computing, both for private clouds as well as for large public clouds.
What will be the key communications technologies five years from now?
I'd say video, video, and video.
Video has transformed the consumer experience, it has really changed social networking and social tools, and it is changing what we expect to see on our mobile devices. It will change the experience of entertainment on any number of pieces of glass from a television to a tablet to a mobile phone. Video was the killer application that actually [prompted]user-created content, and it is the application that is creating new mobile experiences and mobile applications. It will also transform how collaboration is done in business.
How does your Canadian background help you manage Cisco's international operations?
If you look at how we work in Canada, we generally have to [deal with]big markets and individual smaller markets. We respect the vast differences in a large and complex geography which is unique to Canada. There's an ability to create some form of consensus of opinions, and that generally works very well in an international business.
Canadians are also very open to the way in which European businesses think, and we are generally well received in Asian culture. Canadians are often perceived as good collaborators, and if you look at the basic requirement today for global business, collaboration underlies everything. The perspectives that we grow up with here, that we experience in university here, that we see from our political systems here, generally serve global businesses well.
Are you interested in taking the top job at Cisco after Mr. Chambers retires?
The good news is that John has recommitted to our board for another three to five years. That's a very important thing right now because a lot of people are asking whether or not we are focused as a company. John is committed to demonstrating that we will get back on track. I think we stumbled in terms of the expectations externally, and we are very committed to show that we are ready to do this. So John is in the seat for the next three to five years. I'm glad he is. We are working pretty well as a team.