Transcript Document

The View From Cisco
Ammar Hanafi
VP, Strategy & Business Development
4916_04_2002
© 2002, Cisco Systems, Inc. All rights reserved.
2
It’s The End of The World
As We Know It…
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© 2002, Cisco Systems, Inc. All rights reserved.
3
A Rapid Decrease in Venture Investing
5779
6,000
Amount Invested ($B)
$100
5,000
Number of Deals
4400
$91.6
4,000
$75
2149
$50
2459
3,000
$47.2
2780
1888
$32.1
1313
$25
$6.8
$9.8
$12.8
$17.6
1,000
$0
0
1995
1996
1997
Source: VentureOne
© 2002, Cisco Systems, Inc. All rights reserved.
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2,000
1998
1999
2000
2001
4
…..Driven By Technology Spending
50%
48%
46%
44%
42%
40%
38%
1996
1997
1998
1999
2000
2001
Source: Morgan Stanley Technology Research, March 2002
Notes:Technology Spending defined as IT spending share of total nominal business
equipment spending
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5
The Service Provider
Spending Decline Is Even Steeper
35%
33%
Historical Average
of Capex /Revenue (%)
1985-2000
15%
30%
29%
25%
25%
21%
20%
18%
15%
15% 15% 15%
15% 16%
14%
15% 15% 15%
22%
20% 20%
19%19%
14% 14%
10%
5%
0%
'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02E'03E'04E'05E
Source: Goldman©Sachs
2002, Cisco Systems, Inc. All rights reserved.
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6
…Especially By Segment
(In Billions)
$120
$108.5
$100
$98.3
$19.6
$21.3
$79.9
$80
$18.0
$11.5
$60
$8.4
$2.6
$57.6
$20
$13.3
$1.8
$1.3
$3.8
$16.0
$29.4
$41.2
$38.1
$17.6
$4.8
$1.5
$3.9
$1.4
$3.2
$1.4
$3.6
$1.4
$17.0
$34.0
$20.9
$21.0
$21.8
$23.4
$18.6
$19.7
$24.4
$9.2
$40
$5.2
$73.8
$71.2
$81.9
$77.3
$20.8
$18.9
$30.8
$33.5
$36.3
$28.3
2002
2003
2004
2005
$0
1998
ILECs
1999
2000
IXCS
Source: Goldman©Sachs
2002, Cisco Systems, Inc. All rights reserved.
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2001
CLECs
Broadband
Wireless
7
Investor Exits Dramatically Impacted:
Liquidity Shifted to M&A in 2001
2001
2000
1999
1998
1997
1996
1995
0%
20%
40%
IPO
Source: VentureOne
© 2002, Cisco Systems, Inc. All rights reserved.
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60%
80%
100%
M&A
8
…But This Doesn’t Tell the Whole Story
122
115
108
$50
98
$45.5
86
$40
98
93
84
100
81
79
70
$30
69
53
$23.7
$20.3
$20
50
$15.7
$13.2
$10
75
$11.6
$8.7
$4.2
$5.4
$7.2
$5.3
25
$4.5
$2.7
$0
0
4Q98 1Q99 2Q99 3Q99 4Q99 1Q00 2Q00 3Q00 4Q00 1Q01 2Q01 3Q01 4Q01
Amount Paid ($B)
Source: VentureOne
© 2002, Cisco Systems, Inc. All rights reserved.
4916_04_2002
Number of Transactions
9
It’s The End of The World As
We Know It…
But I Feel Fine !
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© 2002, Cisco Systems, Inc. All rights reserved.
10
Internet Penetration Lags Other
Communications Technologies
Higher Penetration
Region
Non-Japan Asia
Population
(MM)
2,882
Telephone
Lower Penetration
Cable
6%
20%
PC
1%
Mobile
Phone
2%
Internet
1%
Europe
630
40
24
17
16
14
Latin America
414
13
13
4
5
3
North America
307
66
69
44
24
33
Japan
127
50
29
24
37
23
Rest of World
1,583
9
21
6
3
2
Weighted Average
5,943
15%
23%
7%
6%
5%
Source: Morgan Stanley
Internet Research, December 2001
© 2002, Cisco Systems, Inc. All rights reserved.
4916_04_2002
11
Technology Spending
As a % of U.S. Business Capital Spending
50%
48%
46%
44%
42%
40%
38%
1996
1997
1998
1999
2000
2001
Source: Morgan Stanley Technology Research, March 2002
Notes:Technology Spending defined as IT spending share of total nominal business
equipment spending
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© 2002, Cisco Systems, Inc. All rights reserved.
12
Technology Spending
As a % of U.S. Business Capital Spending
60%
Dec 2000: 50%
50%
Tech Spending as a % of Business
Capital Equipment Spending
40%
Extended Trend Line
Jun 1995
Commercial Internet: 42%
30%
20%
Jan 1980
PC Introduction: 28%
10%
0%
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
Source: Morgan Stanley Technology Research, March 2002
Technology Spending defined as IT spending share of total nominal business equipment
spending
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CIOs Are Spending Money (9/02 Priorities)
1. Information Security
2. Cost Cutting
3. Application Integration
4. Disaster recovery/business continuance
5. New software application
deployment/development
6. System and storage consolidation
Source: Goldman©Sachs
IT Survey, 9/02.
2002, Cisco Systems, Inc. All rights reserved.
4916_04_2002
14
VC Market Starting to Stabilize
25.00
1600
20.801417 1374
20.10
18.60
1181
1227
17.40
1200
Billions of $
15.90
1041
1000
15.00
888
901
800
10.00
8.80
716
9.20
9.20
666
7.80
606
6.00
614
6.20
600
476
4.90
5.00
Number of Deals
20.00
1400
497
4.50
400
200
0.00
0
2Q99
3Q99
Source: Venture One
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4Q99
1Q00
2Q00
3Q00
4Q00
Amount Invested
© 2002, Cisco Systems, Inc. All rights reserved.
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
Number of deals
15
So Where Do We Go
From Here?
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Three Sources Of Technology Spending
• Consumers
• Enterprises
• Service Providers
Large Enterprise Leads The Market
In Technology Adoption
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17
Enterprise Technology Spending Cycles
Source: Lehman Brothers Research
Phase IV
Replacement
Acceleration
Millennium
Phase V
Pent up
Demand
on Internet
Dominant
Themes
Phase I
Automating
Basic
Processes
80
Phase II
IT Spend
Shifts to End
User and
Departments
85
Phase III
Making IT
Productive
90
95
Phase VI
Extended
Enterprise
00
05
Technologies
• Mainframes • PCs
• Lack of
• Mini-computers
standards
• Departmental
• Custom
buyers and
software © 2002, Cisco
solutions
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Systems, Inc. All rights reserved.
• LANs
• E-Mail
• Packages
• Standards
• Internet
• Re-centralisation
of buying
• Replenishment
of infrastructure
• Mobile internet
• Supply chain
• CRM
• Extranets
• Convergent Tech
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The Impact of The Extended Enterprise:
Network Security Circa 1995
PSTN
Remote
Site
PSTN
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Frame
Relay
X.25
Leased
Line
19
The Impact of the Extended Enterprise:
Network Security Circa 2001
Internet
Internet-Based
Intranet (VPN)
Internet-Based
Extranet (VPN)
PSTN
Remote Site
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Service
Provider
Partner
Site
20
Computing/Data Networking
Technologies Are The Foundation
TDM/Circuit Infrastructure
L2 Dx Services, I.e. ATM, Frame
Leased Line Services
Key and Dx PBX Systems
Local Servers
Enterprise Storage Arrays
Narrowband Consumer Services
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Packet-Based Infrastructure
IP VPN
Metro Ethernet Services
IP Telephony
Distributed Computing
Networked Storage
Broadband—Ethernet, Wireless,
Cable, xDSL, PON
21
The Cisco Opportunity:
Enterprise Networking Leadership
3Com
1%
Dell
3%
Compaq
4%
IBM
4%
Nortel
8%
Other
3%
Cisco
77%
80% of CIOs indicated that competitors were “very unlikely” (57%) or
“somewhat unlikely” (23%) to displace their current vendor of choice
Source: Morgan Stanley
CIO Survey, March 2002
© 2002, Cisco Systems, Inc. All rights reserved.
4916_04_2002
22
The Cisco Opportunity:
Service Provider Transition
Data Services Account for 19% of SP Revenues
But Are 85% of Revenue Growth
84.5%
90%
75.7%
80%
67.4%
70%
60%
50%
41.5%
56.5%
54.9%
45.2%
40%
30%
20%
15.8%
15.9%
16.7%
17.2%
18.8%
18.5%
19.0%
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
10%
0%
Source: UBS Warburg
© 2002, Cisco Systems, Inc. All rights reserved.
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Network of the Future
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© 2002, Cisco Systems, Inc. All rights reserved.
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