Cisco Seeks Stronger Foothold in Lucrative China Market

Strategic Insights -

Cisco Systems is preparing to announce a partnership with Chinese server maker Inspur Group, a move that aims to boost the company's presence in a rapidly growing but increasingly competitive market. The partnership, to be announced by CEO Chuck Robbins on September 23 during a visit by Chinese President Xi Jinping, will see Inspur resell Cisco's networking products and potentially develop hardware jointly. This move is part of Cisco's broader strategy to invest in emerging markets, where the next billion users will come from.

Key Takeaways:

  • Cisco is seeking a stronger foothold in the Chinese market, which is attractive due to its huge population and growing middle class.
  • The partnership with Inspur will involve the reselling of Cisco's networking products and potential joint development of hardware.
  • Cisco has faced growing competition from Chinese vendors like Huawei Technologies and tensions between US and Chinese lawmakers over cyber-security suspicions.
  • The US company has seen its market share and sales in China fall over the past several years, but has shown some improvement in recent quarters.
  • Other US tech vendors, such as Hewlett-Packard, Intel, and Dell, have also made significant investments in China to gain a foothold in the market.
  • Cisco CEO Chuck Robbins will announce the partnership during a visit by Chinese President Xi Jinping, who will also meet with other high-profile tech executives, including Apple's Tim Cook and Microsoft's Satya Nadella.
  • The investment by Cisco will be small initially, but could grow in the future, according to the Wall Street Journal.

Statistics:

  • Cisco aims to invest $10 billion in projects in China over the next several years.
  • HP's joint venture with Tsinghua Unigroup will have 8,000 employees and $3.1 billion in annual revenue.
  • Intel's $1.5 billion investment in Tsinghua Unigroup gives it a 20 percent stake in the state-owned venture.
  • Dell plans to invest $125 million in the Chinese market over the next five years as part of its "In China, for China" 4.0 strategy.
  • Huawei Technologies has been growing its presence in China and other emerging markets, with revenue increasing by 67% in 2014.

Sources:

  • Wall Street Journal, citing unnamed sources familiar with the discussions
  • Global Data Point, " Cisco Seeks Stronger Foothold in China Through Partnership with Inspur" (Note: The original source is not explicitly stated, but the text appears to be adapted from the article in the Wall Street Journal mentioned in the original text.)