Mumbai: After making at least a dozen direct investments in Indian firms and more indirect investments through its venture capital (VC) funds, networking and communications firm Cisco Systems Inc. now plans to make India “a leadership hub for the Asia-Pacific region”.
“A significant number of acquisitions we do will have an India component in it—whether the buyouts are in India or elsewhere,” said Hilton Romanski, vice-president (corporate development), Cisco.
He cited the example of Star Networks, a Boston, US-based company for mobile innovation, which takes intellectual property (IP) to services providers. “This tech is highly disruptive. And the bulk of engineers who built the technology were from Bangalore and Pune,” he said.
The Cisco Global Development Centre in Bangalore is the largest such centre outside the US. Besides, Cisco Systems (India) Pvt. Ltd has joint development centres with Wipro Technologies Ltd and Infosys Ltd in Bangalore, HCL Technologies Ltd in Chennai and Zensar Technologies Ltd in Pune.
The $43 billion Cisco uses these facilities to develop solutions for customers in emerging markets in Asia, including China, and the Middle East, Africa and Latin America, and eventually for developed markets such as North America and Europe.
Four years ago, Cisco had announced a $100 million venture capital fund for early-stage Indian firms. This was in addition to the $100 million it had allocated to funds focused on India—part of its $1.1 billion overall investment plan for the country.
Cisco has invested in Netmagic Solutions Ltd, Servion Global Solutions Ltd, Nimbus Communications Ltd, Satyam Global Lifenet, Indiagames Ltd, and Bharti Telesoft Ltd.
Romanski spent most of his time during his recent visit to India meeting officials of companies involved in mobility, video, collaboration and core—routing and switching—technologies.
Spotting trends: Cisco vice-president for corporate development Hilton Romanski. Hemant Mishra/Mint
“These themes are the lifeblood of how to grow our company. Over the next 12-18 months, you will see us making investments in all these areas,” he said. Cisco’s investment strategy, he said, “helps us see ahead of the market before things really take off and accelerate”.
The investments are typically less than 20% of the total invested capital of the firm. “We like to stay active working with our portfolio companies, understanding the technology synergies with Cisco, and in same case, taking the product to the market jointly,” he said.
In July 2010, India’s largest telco, Bharti Airtel Ltd, announced a tie-up with Cisco and Servion to get into hosted contact centre services—which enable firms to access technology without having to buy software licences. In April, Netmagic Solutions, a managed information technology hosting services provider, announced the beta release of its next generation cloud computing platform, developed along with VMware and Cisco.
Cisco has grown primarily by acquiring at least 160 firms—most of them in the US but, lately, in Europe and China too. According to its annual report, the firm has around $44.6 billion in cash and cash equivalents.
“We typically enter markets through acquisitions, bolster our strength in those markets, and continue to look for technology disruptions. I’ve been to India a dozen times. The last time was three years ago. One of the first things I wanted to do was to come back to a market I helped build from an investment portfolio perspective around 10 years ago, and get more aggressive in this market,” said Romanski, who has been a part of corporate development in the firm for almost a decade, and now heads it after Charles Carmel, who helped lead more than $20 billion in mergers and acquisitions, left the company.
Cisco’s rivals, both worldwide and in India, include Juniper Networks Inc., Hewlett Packard Co. (HP) and D-Link Corp. This September, Cisco launched a marketing campaign against Juniper Networks, which the latter dismissed as a “publicity stunt”, according to media reports.
Globally, the sale of ethernet switch vendors was down 8.8% year-on-year in April-June to $4.6 billion, primarily due to competition between market leader Cisco and rivals HP and Juniper, according to market research company Canalys.
Cisco is the biggest ethernet switch vendor by a large margin but faces intense pressure on both its core switch and overall enterprise networking businesses, according to Canalys.
The firm doesn’t give its India figures. According to Dataquest’s top 20 list for 2011, Cisco Systems India was ranked 11 with a revenue of RS 8,157 crore—67% of which came for routing and switching businesses and the remaining from non-core businesses including audio, video, services and security.
Intel Capital India Technology Fund eyes India’s technology firms the same way with its $250 million fund to help stimulate local technological innovation.