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CISCO is very good at acquiring the promising small companies during the period of economic depression. Will it copy the bottom with the opportunity of this financial crisis? The president of CISCO China just refused to give out direct answers.
 
In the period of globalization, the different parts of the world influence each other. The financial storm has already swept the Silicon Valley. Can China's IT industry be immune to the influence? The changes of the high-tech multinationals have great impact upon people's confidence in the outlook of IT industry.
 
CISCO which always performs stable and well is undoubtedly the focus of public at this time. At the end of this October, CISCO China once again attracted people's attention. The news that the president of CISCO China would retire to the second line was widely spread out in the IT industry.
 
On November 3, Lin Zhenggang, President of CISCO System (China) Networking Technology Co., Ltd (CISCO China), received an interview of the journalist. When talking about the "retirement", Lin laughed brightly and clearly and said: "That's totally nonsense. I receive the call from our boss every day. Do you think I will retire?"
 
Lin Zhenggang, who just attended the "2008 China Global Philanthropy Forum", said: "CISCO is making progress in the designated direction. The financial crisis gives CISCO China no extra burden." Not long before, CISCO synchronously started a new round of advertising movements for brand promotion in the world with the scheme of "the Human Network Effect". "Our advertisements are being broadcasted in many places."
 
No Extra Burden
 
In September 2008, Lehman Brothers went bankruptcy and Merrill Lynch was acquired. CISCO unfortunately became one of the five IT giants affected by the collapse of Lehman Brothers.
 
Merrill Lynch and CISCO have already collaborated on the IT projects for years. From 2005 Merrill Lynch began to purchase the equipments of CISCO. In May 2005, CISCO declared that they would set 100 thousand telephones for Bank of America. So it was undoubtedly that the acquisition of Merrill Lynch by Bank of America made CISCO lose an important customer. The share price of CISCO dropped greatly soon after the coming-out of the news.
 
After the breakout of the financial crisis, CISCO's CEO John Chambers vowed solemnly in the Gartner Conference that CISCO would not take any measures of cutting jobs. However, on October 16 which was several days later than his declaration, CISCO announced that it would lay off 129 employees in the plants of Texas, the USA. The number of cutting jobs, though small, was a bad signal after all.
 
Now the world is passing through the troublesome time. Many multinationals' affiliated companies in China changed a lot, especially in their personnel. On October 31, President of Nokia Siemens Greater China Region David Ho and General Manager of Motorola China Ren Weiguang resigned one after another. So it was not strange that there was the news that Lin Zhenggang would be retired at that time.
 
Lin Zhenggang joined in CISCO China in 1998, mainly responsible for all the businesses in China except for the field of operators. During this period, he not only overfulfilled the revenue target but also develop the financial business into an independent business field. Lin owns rich knowledge in the financial business. In his opinion, the sub-prime debt crisis brought great damage to Europe and America. But its impact upon China was much smaller.
 
"China is unique in its economic development pattern. It has established an isolation wall for China together with its monetary and financial policies," said Lin Zhenggang. From the long-term view, the development of China's economy will be better and better, though some changes must be made during the process. In Lin's opinion, this year China's economy still can keep a high growth rate. "Since the reform and opening up, China has already experienced a lot of changes. There is no country in the world having the same development pattern as China. It can be said that China has created an economic miracle in the world."
 
Will CISCO take the Chinese market as its harbor of refuge to avoid the financial crisis? And will this action bring new stress upon CISCO China? Lin Zhenggang said: "Actually, the problems of the financial crisis haunt us every day even before the crisis. At this time those problems come out collectively. Each quarter we have the stress of how to increase our profits. Besides, now CISCO China is still making progress in the designated direction. By now we still have had no extra stress from the new index from the headquarters." According to Lin, CISCO China's business performance has not decayed by now. And the basic tone of CISCO China's future development will not change except for the enhancement and betterment in the relationship between the enterprise and China’s central government.
 
Liu Yongchun once worked for a high-tech communication foreign enterprises and is a senior professional with 17 years' experience in the Chinese market. According to him, the financial crisis has little effect upon China's telecom industry. The investment will go on after the restructurings of the operators, such as the 200-billion-Yuan investment (USD 28.6 billion) from the Chinese railway system. China is still a country whose economic growth depends on the investment. Despite the financial crisis, there are a lot of business opportunities in China's telecom industry. For the equipment manufacturers like CISCO there are still a lot of opportunities of development in China.
 
In addition, Liu Yongchun, with his experience, thought that most of the high-tech multinationals had already decided their directions of research and development and they had already begun to implement their plans in those directions. The financial crisis may force those enterprises to make some small adjustments; however, their directions of development will not change. "At least the present influence of financial crisis is not so large that the enterprises have to make big changes," said Liu. Usually the multinationals have correct judgments in the market. Though China's market is much less influenced, those multinationals will not place too much hope upon it. "After all, the business in China is only a small part of the global market, while the incomes from the European and American markets still take a larger part. Last year the cost in China's market increased a little, but is still lower than the one in Europe and America. Those foreign multinationals will increase their investments in China appropriately, but the amount can not be too large."
 
This saying had been confirmed by Lin Zhenggang. He said that presently CISCO China was following their decided plans of development. "On the first day of this July, CISCO China signed a memorandum with Sichuan provincial government that CISCO China will put not less than 300 million Yuan (USD 42.9) in Chengdu." Now this plan is being carried out gradually.
 
Global Cash Flow
 
All the enterprises have to think of how to go through the "winter"safely. However, how will CISCO overwinter is beyond Lin Zhenggang's power. He can only give a "general" answer: "The global financial crisis is also a process in which the fittest survives. On the one hand it can be a good opportunity for those enterprises with more power and better performance to absorb the weaker ones and expand their own scales and strength. On the other hand, it is undoubtedly a challenge for the weak enterprises, but they can also take advantage of this financial crisis to avoid the mergers and acquisitions by larger and stronger enterprises which are weakened by the crisis. We must maintain our cautious and rational attitudes towards the operation and investment. I believe most of the Chinese enterprises can survive this difficult time."
 
CISCO used to be very good at acquiring the promising small companies during the period of economic depression. Will it copy the bottom with the opportunity of this financial crisis? Lin Zhenggang just refused to give out direct answers.
 
A third-party consultation company has spent a long time observing CISCO. According to an analyst from this company, any countries attending the globalization of economy can not avoid the influence of this financial crisis. The large-sized multinationals, like CISCO, is unlikely to get rid of the derived influence. Presently, the telecom operators become more and more cautious in the network of CAPEX. CISCO and some other companies of the same kind must take some measures to save the cost, which will bring some impact upon its business. It has laid off over 100 employees, but the number was much smaller than the 3000 laying-offs by Motorola.
 
The financial report of CISCO showed that its net profit ratio was better than its main competitors, such as Motorola, Ericson and Alcatel-Lucent. "This means that CISCO has already prepared well for the advent of this crisis by making some adjustments." The financial crisis is not scary for the enterprises which have made enough preparations and countermeasures.
 
The financial crisis forces many enterprises to reduce their costs. This is an unprecedented business opportunity for its "TelePresence" Unified Communications Platform. "Such a platform can enable the employees of the enterprises using it to have a face-to-face communication without making business travel. This can help the enterprises to lower their operation costs and increase their business efficiency," said the analyst. He also gave out his opinion on CISCO's "endowment" in acquisitions: "When the whole market is under depression, it may be a good opportunity to complete some acquisitions. That's because the evaluations of some companies may be quite low. However, to have enough cash for the 'winter' is more important for a company. I believe that CISCO will formulate clear and balanced operation strategy to deal with the financial crisis during this special period."
 
Liu Yongchun also said: "In the period of financial crisis, the venture investment will no longer be put in the new fields. However, the high-tech multinationals will make use of their own experiences and confidence in the future to make some investments in the emerging enterprises. But those are not the most important things. How to survive this financial crisis without being much influenced is their common primary task. To ensure that they have enough cash flow to maintain the enterprises' smooth development is the primo consideration."
 
Lin Zhenggang said: "CISCO is always very conservative in the finance. Presently CISCO has the cash flow of more than 30 billion Yuan (USD 4.3 billion)."
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