If you listen to management, you'd believe that Cisco Systems (Nasdaq: CSCO) can still kick its performance up another notch or two. In fact, according to CEO John Chambers, we have just barely started to see the most exciting growth phase in the company's history.
From almost any other business leader, I would take this sort of statement with a wheelbarrow full of salt -- these guys are expected to be cheerleaders for their own team, after all, and tend to talk about massive opportunities at every turn.
But John Chambers is different. He understands that perhaps his company's greatest asset is its unique place in the business world, with an ear to the ground that hears what its customers want and need several years out into the future.
He said what?
As I've said before, perhaps Google (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT) can match the breadth in information supplies, and I'd venture to put IBM (NYSE: IBM) into that category as well. But none of these eminent operations has the unique combination of business focus, customers addicted to the product, and general friendliness in its partner relations of Cisco. And Chambers plans accordingly.
In the last quarterly report, he said it flat out: "Our success is based on the ability to foresee market transitions, which has enabled us to deliver the right products for today's market opportunities and prepares us to take advantage of new opportunities in the future." He then went on to outline an ongoing market transition into the network as a platform for communications and IT functions, driven by the worldwide collaborative verve that has been dubbed Web 2.0.
This time, Chambers elaborated on that vision. "Collaboration has already transformed almost every area of our business internally," he said, "resulting in the potential for dramatic gains in productivity and efficiency. We believe this new model will help enable Cisco to identify, target, and capture market opportunities more effectively than at any other time in our history."
Web 2.0 repercussions
You'd better believe that a change is coming when the normally rather reserved Chambers lays it out like that. Cisco is far from the only company to benefit from a collaboration-heavy revolution, of course -- just ask Yahoo! (Nasdaq: YHOO) and Oracle (Nasdaq: ORCL) how they feel about getting end-users to contribute information to the corporate data warehouses of the world, for example.
Yet the Cisco opportunity is of a different magnitude. The more content that Yahoo! users send in to that company's data centers, be it text, images, video, audio, or some collage of all of these media types, the more robust the company's -- and the nation's -- networks have to be. The same goes for Oracle, which wants to sell more databases and content-management systems to someone like Yahoo!, but those data stores won't fill up all by themselves. Nope, the network has to keep up again.
Indeed, the newer products from Cisco and its competitors have started to take over business functions that used to live on the server endpoint. So now, details such as data security and content-based traffic prioritization are moving up the traffic link into the network architecture itself. And nobody can exploit a market shift like this the way Cisco can. Newer, better, and more networking equipment doesn't come cheap, and today's net-savvy business world simply can't do without it these days.
Foolish takeaway
None of this is any surprise to longtime Cisco watchers, of course. That's only natural. This company isn't into surprises and shocks; it's into managing for the very long haul, and Chambers has been known to scoff at short-term targets on a quarterly -- or even annual -- scale. The company is today reaping what it planted many years ago, and it looks to be bumper crop upon bumper crop. And management is still cooking up plans for the next five to seven years as we speak. How delightfully Foolish!
Further Foolishness:
For the life of him, Anders can't see why Cisco hasn't made it onto a Foolish newsletter scorecard yet. But Microsoft is a
Motley Fool Inside Value
pick, and Yahoo! is a
Motley Fool Stock Advisor
recommendation. See how our top analysts figure that these stocks are better than Cisco with a couple of free 30-day trials. Hmpf.
Fool contributor Anders Bylund is a Google shareholder but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is your personal guide to the next five to seven years.
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