Free Essay

Cisco Routers

In: Computers and Technology

Submitted By ssterling
Words 1459
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Cisco systems were founded in December 1984 in California, by a husband and wife team from Stanford University, Leonard Bosack and Sandra Lerner. At Stanford, Bosack found a way to connect the two local area networks where he and his wife worked, 500 yards across campus.
! They initially tried to sell the inter networking technology that Bosack had developed to computer companies, but none were interested. With no buyers they decided top start their own company, Cisco Systems.
! Cisco’s primary product from the beginning was the inter networking router; a hardware device incorporating software that automatically selects the most effective route for data to flow between networks. Cisco thus became the first company to provide a multi-protocol router when it shipped its first product in 1986. One year later after initial start, Cisco was selling $250,000 worth of routers per month. Sales for the fiscal year ending July 1987 were 1.5 million, and the company had only eight employees at the time.
! In the beginning, Cisco marketed its routers to universities, research centers, the aerospace industry, and government facilities by contacting computer scientists and engineers via ARPANET. In 1988 the company began to target its internetworking routers to mainstream corporations with offices in multiple locations that used different networks.
! Cisco had a high rate of sales growth in the early years, however they were increasing in need of cash if they were going to continue to grow. Bosack and Lerner were forced to turn to a venture capitalist. They turned to Donald T. Valentine of Sequoia Capital, however, he required them to surrender to him and he took controlling stake in the company. Valentine brought in John Morgridge, as the company’s president and chief executive officer. In February 1990 under new leadership, Cisco went public, after which Bosack and Lerner began selling their shares. Sales for July 1990 were $69.8 million, net income was $13.9 million, and the company had 254 employees.
! With Morgridge running Cisco, the company built up its sales force to market its products to more corporate clients. They were now able to market its products to all kinds of major corporations to help them link the computer systems of their headquarters, regional, and branch offices.
!
! The company grew at tremendous rate as its market rapidly expanded. In the early 1990s, companies of all sizes were installing local area networks (LANs) of personal computers. Cisco’s sales jumped from $183.2 million in fiscal 1991 to $339.6 million in 1992, and net income grew from $43.2 million to $84.4 during the same period. In 1992, Fortune magazine rated Cisco as the second fastest growing company in the United States.
! In January 1993, Cisco introduced a new flagship product, the Cisco 7000 router, which featured a 50 percent improvement in performance over the AGS+, Cisco’s
Existing high-end router. The Cisco 2000 was aimed at companies desiring to link their smaller, remote branches or even remote employees, but unwilling to pay a premium price. Also during this time, the first network with over 1,000 Cisco routers was created. International sales became an important part of Cisco’s business. Subsidiaries were established in Japan and Australia, and a European Technical Assistance Center was established in Brussels, Belgium. International sales steadily increased, accounting for 35.6 percent of sales in fiscal 1991.
! In 1992, Cisco entered new distribution agreements with Bell Atlantic Corp. and U.S. West Information System Inc. Cisco also signed marketing agreements in 1993 with Pacific Bell. Cisco made other strategic alliances to positions itself better in the maturing internetworking market. Cisco entered into joint agreements with Microsoft Corporation to market Cisco’s first PC-based router card with Microsoft’s Windows NT Advanced Server networking software through Microsoft’s marketing channels. Cisco established a partnership with Novell to integrate Cisco’s routers with Novell’s Netware network software.
! Early in 1993 Cisco made its first acquisition. For $95 million, it acquired Crescendo Communications, which had products for a new technology called Copper Distributed Data Interface (CDDI). Early in 1994, Cisco announced a new networking architecture, Cisco Fusion, to provide clients with networking technologies of ATM and LAN switching. Cisco Fusion allows users to take advantage of routing and switching techniques. In October 1994, Cisco completed two more acquisitions with companies that were involved in the switching sector. It spent $240 million for Kalpana, Inc., a maker of Ethernet switching products; and $120 million for Light Stream Corp., which was involved in ATM switching and Ethernet and routing.
! In January 1995 John T. Chambers was named CEO of Cisco. He stepped up the company’s acquisition pace to keep ahead of its rivals and to fill in gaps in its product line, aiming to provide one-stop networking shopping to its customers. The company completed 11 acquisitions in 1995 and 1996. The largest deal during this period was StrataCom, Inc. for $4.67 billion. StrataCom was a leading supplier of ATM and Frame Relay WAN switching equipment capable of handling voice, data, and video. The deal was a key step in Cisco’s attempt to move beyond its core customer base of large corporations, government agencies, educational institutions and utilities and move into the area of telecommunications access providers.
! Cisco continued its blistering acquisitions pace in 1997 and 1998 completing 15 more deals. The largest was in 1998 when they purchased Net Speed, Inc. This allowed them to gain a significant presence in the Internet telephony sector. By the late 1990’s Cisco Systems was the undisputed king of the networking world in July of 1998 the company’s market capitalization surpassed $100 Billion. In just 12 years after its initial public offering, revenues reached $12.5 billion by fiscal 1999. This was not stopping them, during 1999 Cisco became even more acquisitive, snatching up and additional 17 companies, in the process gaining presences in two more emerging areas, fiber-optic networking and wireless networking. In late 1999 Cisco announced that it would acquire the fiber-optic telecommunications equipment business of Italy’s Pirelli S.p.A. for about @2.2 billion. Pirelli capabilities allowed them to take a beam of light
And breaks it into as many as 128 colors each of can carry a separate stream of voice, data, or video. This acquisition took Cisco's market value over $450 billion. Thus making them the third most valuable company in the world. (For a brief period in late March, Cisco actually ranked as the most valuable company in the world, with a total market capitalization of $555 billion). Revenues were soaring, as were earnings, which reached $906 million for the second quarter of the 2000 fiscal year alone.
! Competition is becoming tough for Cisco. Cisco continues to look for new opportunities however there are a lot more players because this field is so lucrative. Juniper came on the scene in 1997. They have taken one-third of Cisco's Internet routing business. Both companies continue to make their products better and faster and seem to keep one upping each other. Juniper also took on Cisco in the security markets; they have taken quite a lot of business aware from Cisco and continue to be a leader in the VPN hardware and software market.
! The Juniper and Alcatel-Lucent are on the carrier edge market. These two companies take turns being the number two competitors to Cisco. They both are after Cisco's 7600 series and new ASR 9000 routers.
! Cisco is still the dominate player when it comes to Ethernet switching, however HP is starting to take on Cisco when it comes to enterprise switching. HP just purchased 3Com, which they believe, will make them more competitive in this market place. HP also is taking on Cisco when it comes to data centers.
! Cisco has close to 58% of the market share in wireless LANs. However, Aruba is in second position with a 9% share. Even thought this is a big gap, Aruba is making inroads in higher education and healthcare. Aruba has plans on moving into other specialty markets to challenge Cisco.
! Cisco is moving fast and furious into the video market and they believe they will have 91% of the IP traffic by 2014. This in turn will drive sales of switches and routers on the back end of service provider networks that will be handling all that traffic. Cisco recently rolled out TelePresence virtual conferencing systems for business and home, and acquired both Pure Digital and Tandberg. This gives Cisco close to 40% share of a $2 billion market. Tandberg's largest competitor, Polycom, isn't too happy about this alignment. In turn, they are partnering with IBM and Jupiter to drive sales of its own videoconferencing systems along with IBM servers and storage systems, and Jupiner routers.

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