Exceeding expectations, Cisco has reported that its total revenue was up 2% to US$13.2 billion in Q1 FY 2020, which ended on October 26. However, its regional revenue in the APJC (Asia Pacific, Japan and China) was down 8%. Cisco expects Q2 revenue to decline 3% to 5% below expectations, partly because of Washington’s trade war with China.
“We had a really good first quarter overall as a company and acknowledged some headwinds in Q2,” said Guy Diedrich, vice-president and global innovation officer at Cisco, about the financial results in an interview with Asia Times. “China represents less than 3% of our total business. It doesn’t have a dramatic impact overall on the company.
“Our hope is that phase-one trade negotiations would be the initial steps towards normalization of relationships between the two countries,” said Diedrich. “Trade wars don’t benefit anybody. Everyone loses. We are much stronger together than we are apart.”
Whatever headwinds that might be there, Diedrich added that Cisco continued to invest in China.
In recent years, Cisco has been working closely with Chinese governments in technology fields, particularly smart cities. For instance, Cisco set up a Smart City in Guangzhou, a major city in the Greater Bay Area. Cisco also headquartered its China Innovation Center in Guangzhou.
Diedrich said the opportunities in the Greater Bay Area were tremendous. “The willingness of the [Guangzhou] government to engage and to invest [in smart cities], their vision and freedom of thoughts around what’s possible are all lined up with Cisco values. That’s why we were able to start the Guangzhou Smart City Project,” Diedrich told Asia Times.
Cisco Smart City was a subset of its more macro Country Digital Acceleration (CDA), which is run by Diedrich. CDA measures its success generally by three metrics – GDP growth, the creation of next-generation digital age jobs, and investments in the sustainable innovation ecosystem, according to Diedrich.
As part of CDA, Cisco Smart City is asking some important questions. Do the things we do in Smart City enhance people’s quality of life? Is information gathered in those smart cities secure? Does it make the city more sustainable? Diedrich answered all these questions.
As smart cities have been a strategic ecosystem innovation for many major tech players, Diedrich said partners need to work together and that Cisco never looked to competitors for innovation.
“When it comes to smart cities, we can’t do it alone. Cisco products and services are only one part of the solution. We have a lot of partners who do sensors, smart lighting, or any other components that we don’t do. We connect the things our partners do,” said Diedrich.
“We’ve been around 35 years and have dozens of competitors around the world. We have never looked to our competitors for innovation or what they are doing to set our paths.
“We focus on what our customers need and what’s coming out next.”
Speaking of innovation, Diedrich said Cisco had always innovated in two ways, one of which was literally acquisitions.
In July, Cisco announced it planned to acquire Acacia, a listed fabless semiconductor company for $2.6 billion. The deal is expected to be closed during the second half of Cisco’s FY 2020.
Actually, over the last 35 years since Cisco was founded, the company has completed over 200 acquisitions. According to Crunchbase News, Cisco completed at least 79 acquisitions between 2009 and 2018.
“Cisco has always innovated in two ways. We have a very significant internal researching development groups. They are constantly innovating our core network, software and security,” said Diedrich.
“But we also innovate through acquisitions. There are so many companies that are doing extraordinary things. We look for areas that marry up to spaces in Cisco that need to be filled.”
Diedrich added, “If we can find an acquisition of a company that is already innovative and we can leverage it across the Cisco landscape, we do it. That’s a very fast way of innovating,”