Cisco in China: I’d Like to Put US$16 Billion on Red, Please
Posted on November 1, 2007
Filed Under China Business, China Distribution, China Internet |
Shanghai Daily reports that Cisco is planning to invest US$16 billion in China over the next three to five years.
Some details:
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- A memorandum of understanding with Alibaba to promote networking services for SMBs
- A doubling of China-based manufacturing
- A joint US$100 million investment with China Development Bank for venture capital for Chinese businesses
- Training and education on Cisco products and technologies
The Alibaba deal is perhaps the most interesting. Pacific Epoch provides some more detail on the deal:
Cisco signed a memorandum of understanding (MOU) with Alibaba Group on November 1 to offer network assistance services to small and medium-sized enterprises (SME), improve Web-EX and innovative technologies, enlarge Alibaba’s overseas market and develop Software as a Service (SaaS) in China, reports qq.com. Cisco also announced today that the company has invested US$17.5 million in Chinese e-commerce company Alibaba Group business-to-business subsidiary Alibaba.com, according to the report.
Phew, do they have to do Jack Ma’s laundry as well? To me this sounds like Cisco is getting (or hoping to get) preferred access to all the small and medium Chinese firms that list on Alibaba. Webex is a web video conferencing solution that Cisco bought last spring. Look for that to be integrated into Alibaba one of these days. The $17 million investment looks like a friendly back scratch from Alibaba as their IPO is expected to be worth over US$8 billion.
I’m not sure how much of Cisco’s “manufacturing” in China is actual manufacturing and how much is the assembly or packaging of OEM parts. Still, it looks like China will be a key supplier for Cisco in the long term.
The $100 million investment fund? Cisco has had an investment fund in China since 2003 or so. They’ve already invested over US$300 million in Chinese firms. It looks like they’ve found a new partner who may be able to help them find the right companies to invest in.
Cisco and training/education in China? At the rate they’ve invested in it in China over the years, I’m surprised they don’t teach basic routing in kindergarten.
It all comes down to the same logic that drives the rest of the IT industry to China: (hopefully) China will become one of the biggest IT markets in the world. There’s a big scramble to get an edge. Cisco used to be the market leader in China, but the likes of Huawei, ZTE, and Harbor (now part of Huawei) have provided uncomfortable competition at all connectivity levels.
Cisco isn’t betting on China, they used to be the market leader six or seven years ago. But with the rise of competition, particularly from domestic firms, Cisco now has to work a lot harder for its share of the market. Just like everyone else.
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