Cisco to spend $16B in China over next five years

by Steven Schwankert

November 1, 2007 —

Cisco Systems Chairman and CEO John Chambers announced on Thursday $16 billion
in new investments in China, including manufacturing, investment and educational
programs.

That includes a $17.5 million investment in Alibaba.com Group as part of its
initial public offering in Hong Kong next week, along with a Memorandum of Understanding
(MOU) with that company to develop technology for small and medium-sized businesses
in China and elsewhere.

Cisco will double its manufacturing in China, Chambers said, a move worth approximately
$14 billion, based on the $7 billion Cisco said it purchased from China over
the past five years. The company has great influence over where its suppliers
manufacture, and many would be directed to do so in China, Chambers said.

The company will inject $350 million into start-up investments and provide
up to $400 million in customer financing via Cisco Systems Capital China, Cisco
said.

It will also open another 300 of its Networking Academies to train 100,000
students on networking technology, as part of an MOU with the Ministry of Education,
under which it will also donate $6 million in networking equipment.

Missing from Chambers' speech was any expansion of Cisco's aggressive acquisition
strategy to China. "We don't acquire competitors," he said, seeming
to rule out a move for China-based rival Huawei
Technologies. "We acquire to move into new areas." That strategy
included the $3.2 billion purchase of WebEx in March.

Chambers is on a whistle-stop tour of Asia, visiting India earlier this week,
where he announced that 20
percent of top Cisco executives would be based in that country, along with
signing a services
agreement with Wipro Ltd.

"Both India and China have [growth, innovation and talent] in front of
them. I don't think it's win-lose. I think both India and China win and in a
big way," Chambers said in response to a question about the importance
of each country to Cisco.

"We don't provide any unique capabilities to any government," Chambers
said, answering an allegation that Cisco equipment is used by Chinese telecom
regulators to block
access from China to various international Web sites, including Wikipedia.
"We will not enable any organization uniquely, including our own U.S. government,"
he said, also revealing that while he is a registered Republican and supporter
of Senator John McCain's presidential candidacy. "One thing a technology
company should never do is fall in love with one political party or one form
of government."

"Cisco is one of Alibaba Group's most important partners, and our relationship
with Cisco as it relates to our numerous small and medium-sized customers is
extremely important," said Jack Ma, CEO of Alibaba, who also attended the
event.

IDG News Service