Cisco Boosts Investments in Asia Pacific as Markets Mature, Technology Adoption Accelerates

September 23, 2004

By Charles Waltner, News@Cisco

This month Cisco Systems made several moves to bolster its sales and expand its business operations in the Asia Pacific region. These included announcements to open a research and development facility in Shanghai, China; start a venture capital operation in India; and establish new financing services for small and medium-sized business customers in Korea.

"Cisco is blessed with a number of large markets, but we're making these investments in Asia now because of these countries' increasing importance to world commerce and our business," said Daniel Scheinman, senior vice president of corporate development for Cisco.

Cisco CEO John Chambers announced the plans for China and Korea on a trip this month to those countries. The visit marks the 10th anniversary of Cisco's operations in China and Korea and the 20th anniversary of the company's founding. Chambers is also taking the opportunity to meet with Cisco's customers in the region and find out how the company can better serve them.

Cisco's recent moves in Asia complement the company's long-standing global technology and market development efforts, which includes 34,000 employees worldwide and existing research and development facilities in the United Kingdom, Canada, India, Israel, and the United States, among other locations. Scheinman emphasized that the overseas investments would not affect any U.S.-based jobs. He noted that the projects had been prompted in part by the strong fiscal years Cisco's subsidiaries had had in each of the countries.

Though the region as a whole is becoming increasingly important for Cisco, the different investments in each country address the unique characteristics of the individual markets. The R&D center in China, for example, will initially focus on developing new features for Cisco's telecommunications equipment, particularly targeting burgeoning Chinese operators. Scheinman added that China's consumers are also rapidly adopting advanced technologies, helping make the country a breeding ground for new communications applications.

The center will help Cisco gain a better understanding of the country's networking requirements, both for businesses and consumers. "By being closer to potential customers, it will help our engineers understand their requirements and react more quickly to their needs," Scheinman said. He added that the R&D facility will also help Cisco recruit top Chinese engineers for work at the research center. Cisco expects the Shanghai facility to open in the later half of 2005.

Cisco plans to invest $32 million in the R&D lab over the next five years and expects to hire 100 employees. "Cisco has already invested $250 million in direct and indirect investments in Chinese startup companies and this represents our step up to the next level of commitment in this very important market," Scheinman said.

In India, Cisco is setting up a venture capital operation to invest in businesses that have an innovative technology or a unique business model that would help Cisco address that country's networking markets.

"India has been referred to for years as 'the land of eternal promise' because its markets always seemed on the verge of really taking off," Scheinman says. "Now we see that promise coming true."

Scheinman says because of changing U.S. visa laws, many Indian technology managers that had been working in the United States are now returning to India to start companies. This trend, combined with India's excellent pool of engineers and burgeoning consumer and business markets make it ripe for investment. "Our new venture capital operation is a reflection of the maturity of India as a technology marketplace," Scheinman says.

This month Cisco also announced plans to establish a $50 million fund to help Korean small and medium-sized businesses adopt and deploy Cisco networking technologies. Cisco's subsidiary, Cisco Systems Capital Korea, will run the fund.

Scheinman says the new $50 million fund for Cisco Capital Korean will help expand Cisco's existing financing programs, which have delivered over $250 million in lease, loan and installment payment financing to Korean service providers and large business customers since 1999. The company will offer flexible leasing and installment payment programs as an efficient way of reducing costs for Korean businesses that want to regularly upgrade network equipment to enhance productivity and sustain competitiveness.

Charles Waltner is a freelance journalist in Oakland, Calif.