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Over the next two decades, the Internet economy will bring about more
dramatic changes in the way we work, live, play, and learn than we
witnessed during the last 200 years of the Industrial Revolution.
Cisco is well-positioned to help our customers survive the Internet
Revolution by turning these changes into competitive advantage. We
provide the Internet solutions that will help our customers generate
new revenue, reduce costs, increase productivity, and empower their
employees.
For the past two years, Cisco has been asking business and government
leaders around the world, "Are you ready?" Using our company as an
example, our focus has been on educating customers about how effective
use of the Internet can increase productivity and revolutionize their
business models. Today, our customers are not only ready, but are
turning to Cisco to show them how
to capture the power of the Internet by implementing open standards-based
Internet business models.
During the last decade, our passion has been to increase customer
satisfaction and to achieve our stretch goal of maintaining the number-one
or -two market share position in every market in which we compete.
Today, Cisco holds a leadership position in 16 of our 17 key markets.
Cisco's success is the result of our solutions that provide data,
voice, and video over a single network and our ability to blend
internal development, acquisitions, and partnerships.
Cisco benefited from exceptional returns this past year because we
successfully increased our customers' satisfaction. For fiscal 2000,
Cisco reported revenue of $18.93 billion, a 55-percent increase when
compared with revenue of $12.17 billion in fiscal 1999. Pro forma
net income was $3.91 billion or $0.53 per share for fiscal 2000, compared
with pro forma net income of $2.52 billion or $0.36 per share for
fiscal 1999, increases of 56 percent and 47 percent, respectively.
Actual net income for the year was $2.67 billion or $0.36 per share,
compared with fiscal 1999 net income of $2.02 billion or $0.29 per
share.
Cisco has been one of the fastest-growing and most profitable companies
in the history of the computer industry. We are widely accepted as
the Internet expert and the Internet company, which is an obvious
advantage when we talk to customers about their futures. Our success
has been rewarded with one of the highest market capitalizations in
the world. This achievement is the result of our commitment to help
customers become successful in today's ever-changing, competitive
landscape.
The Internet
economy has grown more rapidly than even our most optimistic predictions
and fuels the strongest period of economic prosperity in history.
In the United States alone, this economy added 650,000 jobs and generated
revenue in excess of half a trillion dollars in 1999. To put this
in perspective, the Internet economy's workforce now surpasses the
entire active U.S. military, insurance, communications, and public
utilities industries and is twice the size of the airline, chemical
and allied products, legal, and real-estate industries.
There is a direct correlation between the strength of this economy
and the unprecedented productivity gains we are witnessing today.
We refer to this phenomenon as the "Network
Effect," which is the result of information technology becoming
networked and Internet applications being used to re-engineer business
processes. Companies that understand the Network Effect can gain competitive
advantage by quickly detecting and responding to situations such as
real-time changes in customer demand.
Cisco has become a trusted technology partner and business
advisor to many of the largest companies in the world. We are
not only a technology advisor, but also an advanced user of Internet
technology to run our own business. The adoption of Internet applications
in each of Cisco's functional areas is an integral part of our business-planning
process and results in tremendous productivity benefits and cost savings.
During this past fiscal year, for example, 90 percent of our customer
orders were transacted over the Internet. We have created world-class
e-commerce, customer support, and workforce optimization applications
and are the leader in virtual manufacturing, virtual close, and e-learning
solutions.
Our goal is to help customers develop similar, Internet-centric business
models so that they can benefit from productivity improvements. For
example, our Internet
Business Solutions Group Group has consulted with executives in
more than 50 percent of the Fortune 250 companies, 45 percent of the
top companies in Europe, the Middle East, Africa, and Asia, and 65
percent of the leading service providers. This group provides business-strategy
consulting and helps move our relationships with customers from that
of a vendor to a strategic partner.
Successful companies in the 1980s achieved their leadership positions
with a vertical business model and an internal focus. In the 1990s,
Cisco changed the dynamics of market leadership by focusing on a combination
of internal development and acquisitions. This decade, leading companies
will develop internally, acquire effectively, and form an ecosystem
of partnerships in a horizontal, rather than a vertical, business
model.
Companies participating in an ecosystem
-- an open standards-based community that works toward a common goal -- will
emerge as the market and industry leaders of the future. Customers
are the real beneficiaries of our ecosystem model because it allows
us to remain agile, quickly enter new markets, and provide both breadth
and depth of solutions through the ecosystem community.
In addition to expanding our ecosystem, we also increased our investment
in internal product development by 61 percent and continued to grow
through acquisitions. Since 1993, we have acquired or announced our
intent to acquire 65 companies. Moving forward, our technology strategy
will continue to be driven by internal development complemented by
acquisitions and strategic alliances.
Following the lead of business, we saw governments from around the
world begin to recognize the strong correlation between the Internet
and economic success. This past year, we met with government leaders
from many countries, including Argentina, Chile, China, France, Germany,
Italy, Japan, Jordan, Korea, South Africa, Taiwan, and the United
Kingdom. They all realized the Internet's potential impact on their
country's future and were eager to learn how to use the Internet more
effectively.
The Industrial Revolution of 200 years ago divided society by creating
a gap between the "haves" and "have-nots." Today's Internet Revolution
has the potential to unite everyone by combining the strength of the
Internet and education, the two great equalizers in life. By applying
what we've learned in business to all aspects of society, we have
the power to use technology to create an Internet gateway that has
the potential to positively change people's lives. |
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Cisco is in a unique position to be a pioneer in embracing this digital
opportunity and closing the gap. As such, our philanthropy strategy
focuses on education, workforce development, and basic human needs.
We continue to invest and grow the
Cisco Networking Academy Program, which has enrolled more than
81,000 students in 83 countries. These academies provide networking
skills to a broad range of students, including those in high school,
community colleges, homeless shelters, and juvenile centers and outgoing
military personnel.
In addition, our employees contributed more than $1 million to the
Second Harvest Food Bank this past year. Cisco gave more than $2.5
million in grants to our global community and committed another $5
million to Habitat for Humanity over the next five years. We also
launched the Netaid.org
Web site and movement, a joint initiative with the United Nations
Development Program, a number of talented musicians, and several technology
companies, to help end the cycle of extreme poverty. Our employees
supported additional programs such as the Special Olympics, InnVision,
the National Teacher Training Institute, and a variety of global relief
efforts. These efforts are Cisco's way of preparing future generations
and less-developed nations to participate in the Internet economy.
In our opinion, the radical business transformations taking place
around the world will accelerate, making the opportunities ahead of
Cisco far greater than ever before. We believe that Cisco has the
potential to be the most influential and generous company in history.
We are in the fortunate position to be at the center of the Internet
economy, and we recognize that although this position gives us confidence,
we must balance this confidence with healthy paranoia.
We are proud of our accomplishments and want to thank our shareholders,
customers, employees, partners, and suppliers for their continued
commitment and confidence in our ability to execute. Together, we
are only beginning to explore all that's possible on the Internet. |
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