We design, manufacture, and sell Internet Protocol (IP)-based networking and other products related to the communications and information technology (IT) industry and provide services associated with these products and their use. We provide a broad line of products for transporting data, voice, and video within buildings, across campuses, and around the world. Our products are designed to transform how people connect, communicate, and collaborate. Our products are installed at enterprise businesses, public institutions, telecommunications companies, commercial businesses and personal residences.
We conduct our business globally and are managed geographically in five segments: United States and Canada, European Markets, Emerging Markets, Asia Pacific, and Japan. The Emerging Markets theater consists of Eastern Europe, Latin America, the Middle East and Africa, and Russia and the Commonwealth of Independent States. For revenue and other information regarding these segments, see Note 15 to the Consolidated Financial Statements in our 2009 Annual Report to Shareholders. Note 15 is incorporated into this report by reference.
We were incorporated in California in December 1984, and our headquarters are in San Jose, California. The mailing address of our headquarters is 170 West Tasman Drive, San Jose, California 95134-1706, and our telephone number at that location is (408) 526-4000. Our website is www.cisco.com. Through a link on the Investor Relations section of our website, we make available the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”): our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. All such filings are available free of charge.
Products and Services
We sell IP-based networking and other products and services related to the communications and IT industry. Our products and services are designed to address a wide range of customers’ needs, including improving productivity, reducing costs, and gaining a competitive advantage. In addition, our products and services are designed to help customers build their own network infrastructures that support tools and applications that allow them to communicate with key stakeholders, including customers, prospects, business partners, suppliers, and employees. We focus on delivering networking products and solutions that are designed to simplify and secure customers’ network infrastructures. We believe that integrating multiple network services into our products helps our customers reduce their total cost of network ownership. Our product offerings fall into the following categories: our core technologies, routing and switching; advanced technologies; and other products. In addition to our product offerings, we provide a broad range of service offerings, including technical support services and advanced services. Our customer base spans virtually all types of public and private agencies and businesses, comprising enterprise businesses, service providers, commercial customers, and consumers.
Our products are used individually or as integrated offerings to connect personal and business computing devices to networks or computer networks with each other—whether they are within a building, across a campus, or around the world. Our breadth of product and service offerings across multiple technology segments enables us to offer a wide range of products and services to meet customer-specific requirements. We also provide products and services that allow customers to transition their various networks to a single multiservice data, voice, and video network, enabling economies of scale.
As network architectures have become more robust to accommodate the demands of increasing numbers of users requiring an increasing array of network applications, new network-related product markets have arisen alongside our core routing and switching markets. We refer to these new markets that are similar, related, or adjacent to those in which we are active as market adjacencies.
In the past several years we have addressed market adjacencies related to our core routing and switching products through the development of various network-related offerings in our advanced technologies product category. Each of our advanced technologies product offerings, as with product evolutions in our core routing and switching categories, builds upon our existing competencies and, we believe, allows us to expand the overall market for our products and services. In our pursuit of market adjacencies related to our routing and switching products, we have focused our efforts on the following advanced technology product categories: application networking services, home networking, security, storage area networking, unified communications, video systems, and wireless technology. We have also continued to focus on developing a new wave of technologies, which we refer to as emerging technologies, which includes product areas such as Cisco TelePresence systems, physical security, digital media, and the Cisco Unified Computing System. We are in the process of identifying additional advanced technologies for focus and investment in the future. As has been the case from time to time in the past, one or more of our currently identified advanced technologies may be curtailed or eliminated due to market developments or other factors.
We refer to the evolutionary process by which adjacencies arise as market transitions. One example of a market in which a significant market transition appears to be underway is the enterprise data center market. We believe the market is at an inflection point, as awareness grows that intelligent networks are becoming the platform for productivity improvement and global competitiveness. We further believe that disruption in the enterprise data center market will accelerate in the next 12 months, due to changing technology trends such as the increasing adoption of virtualization and the rise in scalable processing. Virtualization is the process of aggregating the current siloed data center resources into unified, shared resource pools that can be dynamically delivered to applications on demand thus providing the ability to move content and applications between devices and the network.
This market transition is being brought about through the convergence of networking, computing, storage, and software technologies. We are seeking to capitalize on this market transition through, among other things, our Cisco Unified Computing System and Cisco Nexus product families, which are designed to integrate the previously siloed technologies in the enterprise data center with a unified architecture.
The competitive landscape in our markets is changing, and we expect there will be a new class of very large, well-financed and aggressive competitors, each bringing its own new class of products to address this new enterprise data center market. However, with respect to this market, we believe the network will be the intersection of innovation through an open ecosystem and standards. We expect to see acquisitions, industry consolidation, and new alliances among companies as they seek to serve the enterprise data center market. As we enter this next market phase, we expect that we will strengthen certain strategic alliances, compete more with certain strategic alliances and partners, and perhaps also encounter new competitors, in our attempt to deliver the best solutions for our customers.
Other market adjacencies on which we are focusing attention include those related to the increased role of video, collaboration, and networked Web 2.0 technologies across our customer markets. The key market transitions relative to the convergence of video, collaboration, and networked Web 2.0 technologies, which we believe will drive productivity and growth in network loads, appear to be evolving even faster than we had anticipated earlier this year. Cisco TelePresence systems are one example of our product offerings that have incorporated video, collaboration, and networked Web 2.0 technologies, as customers evolve their communications and business models.
We believe that the architectural approach that has served us well in addressing the market adjacencies in the communications and information technology industry will be adaptable to other markets. Examples of market adjacencies where we aim to apply this approach are the consumer, electrical services infrastructure, and video market segments. For the consumer market, through collaboration with technology partners, retailers, service providers, and content publishers, we are striving to create compelling consumer experiences and make the network the platform for a variety of services in the home, as broadband development moves from a device-centric phase to a network-centric model. In the electrical services infrastructure market, we are developing an architecture for managing energy in a highly secure fashion on electrical grids at various steps from energy generation to consumption in homes and buildings. With regard to the video market segment, we are focused on simplifying and expanding the creation, distribution, and use of end-to-end video solutions for businesses and consumers.
In order to manage our pursuit of diverse market adjacencies, we believe we need the subject area and functional skill expertise of not just one person but many within our company. Accordingly, we have developed what we feel is an innovative organizational structure of boards and councils, bringing together Cisco managers from across many functional areas within our company to collaboratively define, plan, execute and monitor our progress in these many market adjacencies. While we believe that this collaborative management approach will allow us to take advantage of these often rapidly evolving market transitions and resulting opportunities, this is a new management approach for us and therefore there can be no assurance that this organizational structure will help to produce revenue and market share successes in these market adjacencies.
For a discussion of the risks associated with our strategy, see “Item 1A. Risk Factors,” including the risk factor entitled “We depend upon the development of new products and enhancements to existing products, and if we fail to predict and respond to emerging technological trends and customers’ changing needs, our operating results and market share may suffer.” For information regarding sales of our major products and services, see Note 15 to the Consolidated Financial Statements in our 2009 Annual Report to Shareholders. Note 15 is incorporated into this report by reference.
Our current offerings fall into several categories:
Routing
Routing technology is fundamental to the Internet, and this technology interconnects public and private IP networks for mobile, data, voice, and video applications. Our routing products are designed to enhance the intelligence, security, reliability, scalability, and level of performance in the transmission of information and media-rich applications. We offer a broad range of routers, from core network infrastructure for service providers and enterprises to access routers for branch offices and for telecommuters and consumers at home. Key products within our routing category are the Cisco 1800 Series, Cisco 2800 Series, and Cisco 3800 Series Integrated Services Routers as well as the Cisco 7200 Series, Cisco 7600 Series, and Cisco 12000 Series Routers, and the Cisco CRS-1 Carrier Routing System.
During fiscal 2009, we introduced the Cisco ASR 9000 Series Aggregation Services Routers, which are designed to help service providers deliver bandwidth-intensive video and data services to business and residential customers. The ASR 9000 Series builds on the ASR 1000 Series, our first aggregation services router series, which we delivered in fiscal 2008. In fiscal 2009, we continued to gain traction in the market with the innovative Cisco CRS-1 Carrier Routing System. Developed for service provider core networks, the CRS-1 is designed to provide the flexibility, reliability, and performance that carriers need to transport the growing video and application traffic on the Internet.
Switching
Switching is another integral networking technology used in campuses, branch offices, and data centers. Switches are used within buildings in local-area networks (LANs), across cities in metropolitan-area networks (MANs), and across great distances in wide-area networks (WANs). Our switching products offer many forms of connectivity to end users, workstations, IP phones, access points and servers, and also function as aggregators on LANs, MANs, and WANs. Our switching systems employ several widely used technologies including Ethernet, Power over Ethernet, Fibre Channel over Ethernet, Packet over Synchronous Optical Network, and Multiprotocol Label Switching. Many of our switches are designed to support an integrated set of advanced services, allowing organizations to be more efficient by using one switch for multiple networking functions rather than multiple switches to accomplish the same functions. Cisco offers a comprehensive family of Ethernet switching solutions from fixed-configuration switches for small and medium-sized businesses to modular switches for enterprises and service providers. Our fixed-configuration switches are designed to provide a foundation for converged data, voice, and video services. They range from small, standalone switches to stackable models that function as a single, scalable switching unit. Modular switches offer flexibility for enterprises, which due to large-scale network demands often need to deploy numerous, concurrent intelligent networking services without degrading overall performance. Key products within our switching category are the Cisco Catalyst 2960 Series, 3560 Series, 3750 Series, 4500 Series, and 6500 Series.
During fiscal 2009, we delivered our first hypervisor-based software switch, the Cisco Nexus 1000V Series Switch, which is designed to extend networks into virtual machines. We also delivered the Nexus 2000 Series Fabric Extender which operates with a Nexus 5000 Series Switch, and is designed to eliminate control points and provide additional flexibility following the fiscal 2008 launch of the Nexus 5000 and 7000 Series data center switches. We also introduced Cisco EnergyWise, a software upgrade to Cisco Catalyst LAN switches that extends the network’s ability to monitor and control power.
Advanced Technologies
Application Networking Services
Cisco Application Networking Services is a broad portfolio of application networking solutions that enable high performance and highly secure delivery of applications within data centers, and across WANs to remote and branch office users. Our solutions are designed to help facilitate the deployment and delivery of business applications across an entire organization by using technology to accelerate, maximize availability of, and secure both application traffic and computing resources. A key product within our application networking services category is Cisco Wide Area Application Services (WAAS), a comprehensive WAN optimization solution.
Home Networking
We believe the consumer market is undergoing a market transition from what we call the connected home to the media-enabled home, where all consumer devices, services, and content are designed to enable people to live a connected life that is more personal, more social, and more visual than previously possible with devices in the home. Our home networking products connect different devices in the household, through wired or wireless connections, allowing people to share Internet access, printers, storage, video, music, movies, and games throughout the home. Our products include voice and data modems, routers and gateways, Internet video cameras, home entertainment storage, wireless home audio, home network management software, and other products that are designed to enable customers to experience their digital content in all areas of their lives. These products are sold through select retailers, value-added resellers, online retailers, and service providers worldwide.
In fiscal 2009, under the Linksys by Cisco brand, we introduced home routers and access points supporting the new 802.11n Wi-Fi standard for advanced home wireless networking; wireless home audio kits, which allow people to enjoy music throughout their homes; and Media Hub devices, which allow people to store, manage, and share video, music, and photos throughout their homes and also to access such digital content from outside their homes with an Internet connection.
Security
Cisco security solutions deliver network and content security systems that are designed to enable highly secure collaboration. Our products in this category span firewall, intrusion prevention, remote access and virtual private networks (VPNs), unified client, web, and email security. We focus on a proactive, layered approach to counter both existing and emerging security threats. We provide security solutions that are designed to be integrated, timely, comprehensive, and effective, helping to ensure holistic security for organizations worldwide. A key product line within our security product category is the Cisco ASA 5500 Series Adaptive Security Appliances.
In fiscal 2009, we introduced email and web security products including the Cisco IronPort Email Security Appliance and Cisco IronPort Web Security Appliance for enterprise and midmarket companies and the Cisco Spam and Virus Blocker for small businesses.
Storage Area Networking
We provide storage area networking (SAN) products for data center environments that deliver multilayer, scalable, and highly secure connectivity between servers and storage systems, including products such as storage arrays and tape drives. These products incorporate intelligent network features, such as advanced network security, traffic management, virtualization, and tools that are designed to help make storing, retrieving, and protecting critical data across widely distributed environments more efficient. The Cisco MDS 9000 Series is the key product line within our storage area networking product category.
In fiscal 2009, we introduced support in our MDS 9000 line of storage switches for the emerging Fibre Channel over Ethernet standard. We also transitioned our storage area networking operating system to Cisco NX-OS, which offers companies greater scalability, flexibility, and reduced total cost of ownership while providing a unified software base for the future unification of Ethernet, storage, and high-performance computing networks.
Unified Communications
Cisco Unified Communications products integrate voice, video, data, and mobile applications on fixed and mobile networks, delivering a media-rich collaboration experience to the workspace. Specific products include IP phones, client software, servers, and network appliances supporting call control, contact centers, messaging, conferencing, voice mobility, and collaboration including presence and preference information. These products are available as software and web-based collaborative offerings, as standalone devices, and as integrated components in Cisco routers and switches. These applications use the network as the platform to enhance competitive advantage by enabling users to accelerate decision time and reduce transaction time. The security and scalability of the network enables users in any workspace to connect with one another through a computer, handset, smart phone, or other similar communications equipment. Cisco Unified Communications are part of a comprehensive solution that includes network infrastructure, security, wireless, management applications, lifecycle services, flexible deployment, outsourced management options, and third-party applications. Cisco WebEx products provide web-based collaborative offerings that allow users to share presentations, applications, documents, and desktops, with full-motion video and integrated audio, in a rich multimedia environment online through the use of a standard web browser.
In fiscal 2009, we introduced the Cisco IP Phone 6900 Series, a new line of IP phones, and the Cisco Unified Workspace Licensing program, a flexible approach designed to increase customer utilitization of Cisco Unified Communications products and applications. We also focused on integration between Cisco and third-party products and applications.
Video Systems
Our video systems offerings consist primarily of digital set-top boxes and digital media technology products. Digital set-top boxes provide video entertainment services to consumers. They enable subscribers to access a variety of interactive digital television services developed either by Cisco or third parties. Our equipment includes Standard-Definition (SD), IP television (IPTV) service-enabled, Data over Cable System Interface Specification (DOCSIS), DOCSIS Gateway (DSG), High-Definition (HD), digital video recorder (DVR), HD-DVR, multiple-room DVR, Media Center DVR, and digital-only set-top boxes. Digital media technology products span a wide range of signal processing and headend capabilities including reception, encoding or transcoding, transrating, multiplexing, ad insertion, switching, and modulation. Deployment of these capabilities can help service providers and broadcast customers to more efficiently deliver entertainment, information, and communications services over their existing access networks.
Wireless Technology
The Cisco Unified Wireless Network is designed to unify high-performance 802.11n wireless access across campus, branch, remote, and outdoor environments. This wireless system strives to maximize flexibility and reliability with its access point, controller, antenna, and integrated management products. Streamlined management and mobile device troubleshooting are features of the platform designed to reduce operational cost. This platform delivers, through an open application programming interface (API), business-relevant mobility data, voice, video, and context-aware applications to partners and end-user customers. A key product line within our wireless technology category is the Cisco Aironet product family.
Other Products
Our other products comprise primarily optical networking products, cable access, and service provider voice-over-IP (VoIP) services. We provide optical networking products for both the enterprise and service provider markets. We market and sell analog and digital optoelectronics which may reside in a network operator’s headend, in other facilities such as distribution hubs, and in optical nodes. Our other products also include such emerging technologies as Cisco TelePresence systems, TelePresence Exchange Services, physical security and video surveillance, digital media systems, and building systems that help companies manage energy efficiency.
During fiscal 2009, we announced the next step in our Data Center 3.0 vision: the Cisco Unified Computing System, which is the next-generation data center platform designed to improve IT responsiveness to rapidly changing business demands. The Cisco Unified Computing System unites network, computing, and virtualization resources into a seamless system, which helps companies reduce IT costs and deploy new IT services more quickly.
Service
In addition to our product offerings, we provide a broad range of service offerings, including technical support services and advanced services. Technical support services help ensure that our products operate efficiently, remain available, and benefit from the most up-to-date system software. These services help customers protect their network investments and minimize downtime for systems running mission-critical applications. Advanced services are services that are part of a comprehensive program that is designed to provide responsive, preventive, and consultative support of our technologies for specific networking needs. The advanced services program supports networking devices, applications, solutions and complete infrastructures. Our service and support strategy seeks to capitalize on increased globalization, and we believe this strategy, along with our architectural approach, has the potential to further differentiate us from competitors.
Customers and Markets
Many factors influence the IT, collaboration, and networking requirements of our customers. These include the size of the organization, number and types of technology systems, geographic location, and the business applications deployed throughout the network. Our customer base is not limited to any specific industry, geography, or market segment. In each of the past three fiscal years, no single customer has accounted for 10 percent or more of our net sales. Our customers primarily operate in the following markets: enterprise, service provider, commercial, and consumer.
Enterprise
Enterprise businesses are large regional, national, or global organizations with multiple locations or branch offices and typically employ 1,000 or more employees. Many enterprise businesses have unique IT, collaboration, and networking needs within a multi-vendor environment. Our enterprise customers also include public sector entities and governments. We take advantage of the network as the platform to integrate business processes with technology architectures to assist customer growth. We offer service and support packages, financing, and managed network services through our service provider partners. We sell these products through a network of third-party application and technology vendors and channel partners.
Service Providers
Service providers offer data, voice, video, and mobile/wireless services to businesses, governments, utilities, and consumers worldwide. They include regional, national, and international wireline carriers, as well as Internet, cable, and wireless providers. We also group media, broadcast, and web portal providers within our service provider market, as the lines in the telecommunications industry continue to blur between traditional network-based services and content-based and application-based services. Service providers use a variety of our routing and switching, optical, security, video, connected home, mobility, and network management products and systems in their own networks. In addition, many service providers use Cisco data center, virtualization, and collaboration technologies to offer managed or Internet-based services to their business customers. These technologies include Cisco Unified Communications and call center products and applications, Cisco WebEx collaboration tools, and Cisco TelePresence systems, as well as other video and security products and systems that can be incorporated into network-attached data centers. Compared with other customers, service providers are more likely to require network design, deployment, and support services because of the scale and complexity of their networks.
Commercial
Generally, we define commercial businesses as companies with fewer than 1,000 employees. The larger, or midmarket, customers within the commercial market are served by a combination of our direct salesforce and our channel partners. These customers typically require the latest advanced technologies that our enterprise customers demand, but with less complexity. Small businesses, or companies with fewer than 100 employees, require information technologies and communication products that are easy to configure, install, and maintain. These smaller companies within the commercial market are primarily served by our channel partners.
Consumer
Consumer customers are individuals who use the network at home, or while away from home, for personal use to enjoy a broad range of entertainment, communications, and information experiences. Cisco is able to deliver these solutions to consumers through an extensive vendor network of retailers, partners, service and content providers, and direct online retailers. The Flip Video family of camcorders represents a new addition to our consumer product line, having been added to our product portfolio through the acquisition of Pure Digital Technologies, Inc. during fiscal 2009. The Flip Video family of camcorders is designed to make video simple, accessible, and fun by allowing people to easily capture and edit videos and then share them instantly with friends, family, and on popular video-sharing websites.