December 11, 2006 4:00 AM PST
Making Cisco a household name
In recent years, the Silicon Valley company bought Linksys for home routers and Scientific-Atlanta for its cable boxes. And last week, the company signaled that it will be a very different company in the years ahead with the creation of new business group called Media Solutions, which will develop and market products to digital media content owners.
Dan Scheinman, a 14-year veteran with the company, will head the group, reporting directly to CEO John Chambers.
will head the Media
Most recently, Scheinman has been responsible for Cisco's mergers and acquisition strategy as senior vice president of corporate development. In that role, he led the company to acquire more than 40 companies, including the $500 million purchase of Linksys, a home networking and Wi-Fi routing company, and the $6.9 billion acquisition of Scientific-Atlanta, the No. 2 cable set-top maker.
In his new position, Scheinman will help lead Cisco into the next era, one that could help make the company a household name--like other giant technology companies such as Hewlett-Packard, IBM, Microsoft and Apple Computer--in the next 5 to 10 years.
"I think 2007 and 2008 are going to be dramatic years of change for Cisco," said Zeus Kerravala, a vice president at the market research firm Yankee Group.
"(Cisco Chief Executive) John Chambers has said over and over that the things you do today won't impact the company for two or three years. So I predict Cisco will make some aggressive bets this year and next to ensure that the company continues to grow," he said.
Cisco has long been a solid financial performer, but recently it has experienced record-breaking growth. In November, the company beat Wall Street expectations for its first quarter of fiscal year 2007, which ended on October 28. The company generated $8.2 billion in revenue, a 26 percent increase from the same quarter a year earlier when it generated $6.5 billion. The company's profits also increased 21 percent to $1.9 billion.
Sales grew thanks in part to its phone and cable customers who were upgrading their networks. The company also got a huge boost from Scientific-Atlanta, which it did not own last year.
Scientific-Atlanta's financial success over the last year has been somewhat surprising. When it announced the acquisition nearly a year ago, Cisco had predicted that Scientific-Atlanta's sales would grow anywhere between 10 percent and 14 percent. But Scientific-Atlanta has exceeded those expectations, growing its revenue for the quarter in the low 20 percent range compared with a year earlier.
Chambers said during the earnings conference call in November that Cisco's success today comes from bets the company made years earlier.
"We laid the cornerstones of this strategy three, five and seven years ago," he said. "Many of the market transitions we anticipated are converging today as more and more communications and IT capabilities are moving into the network."
While the bulk of Cisco's revenue will likely continue to come from its traditional enterprise and service provider networking infrastructure business, the company is aggressively pushing into new markets that are more consumer-focused, such as video, home networking and even consumer electronics.
Scheinman believes the next step in the company's strategy is to work more closely with the companies that are creating the movies, TV shows, music and other multimedia content that end up in consumers' homes.