The Sangster Blog from Global Touch

Cisco’s Earnings: What You Need to Think About—NOW!

Another week and more financial earnings reports. This time, the IT tiger, Cisco Systems, reported its first fiscal quarter results for the August through October period after the market closed on November 5. The semi-good news: Cisco reported flat profit with an 8.1% rise in revenue. Bravo, particularly after a ‘bloody’ October. The ‘semi-not-so-unsurprising’ and quasi-bad news: management indicated Cisco will begin to feel the slowing and negative economic effects of the global financial turmoil in its second fiscal quarter (November through January). Translation: management expects a decline in sales of 5% to 10% compared to the same quarter last year. The silver lining: John Chambers (Chairman & CEO) isn't changing Cisco's long-term projected growth of 12% to 17% over the next three to five years.

In typical Cisco style, Chambers announced the company had implemented a number of cost cutting initiatives to combat “fuzzy” visibility. These include:

• “Pause” in hiring
  
• Trimmed travel, meetings, and events budgets, including cancellation of all off-site meetings unless with clients and expanded use of its “Telepresence” video conferencing system
  
• Frozen (select) capital projects

The cumulative goal of these steps is to reduce expenses by $1 Billion by the end of its present fiscal year. Yes, Chambers said $1 Billion—with a “B”… And, while spending is being trimmed, Cisco is continuing to make strategic investments in the U.S. market.

Chambers, in his typical matter-of-fact style, said “we are in a bit of uncharted waters,” but the “things we can control or influence are ok.” He also believes the Cisco vision, strategy, and execution are in good shape.

What should we take away from this earnings call? Three points:

• First, focus on what you can control and influence and double check your vision, strategy, and execution to ensure you, too, are in good shape. Great advice in a back-to-basics market.
  
• Second, double check what you are selling or manufacturing to see if it is bullet proof in a down market. As Chambers pointed during the call, network spending is less discretionary today compared to earlier this decade. And even though some customers may “run longer and hotter without replacements,” Cisco’s products are well positioned in an expansion or replacement market.
  
• Third, invest in new and adjacent markets to capture momentum areas. For partners, this means looking at add-on or complementary offerings, such as expanding services around your core product offerings

No company is immune to the widening global economic “flu” and neither are its partners who sell and support products. However, since Cisco offers technology for nearly everything between the user and the servers it is trying to access, chances are better than not that Cisco and its partners will have less of a bumpy road ahead and be early beneficiaries of market recovery.

10 Steps to Helping Your Customer’s Weather Market Turbulence

Chances are better than not that customers are or have told you that end of year and 2009 IT purchasing and projects may be scaling back.  Here are my thoughts about coping with the present market challenges.

• Audit your customer’s IT infrastructure to help them prioritize IT spending for the next 14 months
• Identify best practices in your customer’s industry to help your customer understand opportunities and challenges with particular focus on where IT can create productivity gains in the business
• Look for opportunistic buying.  As we move through the last calendar quarter with uncertain and possibly sluggish demand, IT manufacturers and publishers will need to move products through the supply chain, so now is the time for deal making.  In other words, don’t be shy about asking for special pricing and other incentives.  If you can’t get it with your primary vendor brand, looking at other brands cost savings and margin profit opportunities
• Have a heart-to-heart chat with your distribution account representatives.  They need to move significant volumes of products, particularly in CQ4:08 and into CQ1:09 and they are great resources to find options and possibilities
• Talk with your top three IT manufacturers and software publishers to ensure you are taking advantage of and receiving the maximum benefit of every program they offer or subsidize
• Look at financing tools to help customers finance IT products and services through leasing, extended payment plans, deferrals, and trade-in allowances.  Finance companies are still in business and, in some cases, are being paid by tier 1 brands to wraps financing opportunities into sales programs.  With access to credit challenging in today’s market, financing experts are more likely to lend based on the strength of a customer’s balance sheet
  
• Evaluate the services that you provide to determine if you can provide them to customers at a lower cost than they are currently paying for them through other 3rd parties or employees.  Whatever the project, providing the customer with a lower cost option could be the beginning of a long-term or expanded relationship
• Assess the value you deliver to your customers.  I know that most partners don’t have the time to think about their business, but this is the time to make certain that you are not just delivering value, but you are delivering the right value that will make your customer’s more successful, profitable, and drive costs out of their business
• Bone up on what your competition is doing.  Very few partners have the time or resources to evaluate how they stack up against competitors.  Now is the time to make certain you are competitive in your offerings and pricing.  And, you don’t want your competitors to snatch your profitable customers away from you
  
• Now it the best time to roll-up your sleeves and build a trusted partner relationship with your customers.  You want to give your customers an on-going reason to pick-up the phone and talk with you even when there is no transaction or project on the table

Just remember, the strongest relationships are started and stopped during times of stress, so make the market chaos a silver lining for your business plan and customer retention and growth strategy.