AUSTIN, Texas -- In a luncheon keynote to hundreds of Dell Computer Corp. customers Thursday, Cisco Systems Inc. CEO John Chambers drove home a basic point: Timing is everything in the new Internet economy.
Thus he had no qualms that Cisco just paid US$7.4 billion for two networking companies that had negligible revenue a year ago. The majority of that amount - some US$6.9 billion - went to Cerent Corp., which had only about US$10 million in sales in the first six months of this year.
Chambers said Cisco's shareholders supported the company's decision..
"Anyone who understood our market understood that the optical transport business was going to explode," he said. "The key is to watch the market and act."
If Cisco hadn't acted, another company would have, Chambers said. "The companies that can't partner and acquire will be left behind."
Putting it all together
"Getting everything connected is everything," he said, predicting that half of the gross domestic product will be attributable to "the Internet Revolution" by 2010.
Chambers also echoed Dell CEO Michael Dell's prediction that online customer support is the service wave of the future. Eighty percent of Cisco's customer support occurs over the Internet via Web-based applications, he said, although he allowed that "I have the advantage that my customers are more technical than most."
Chambers cited a University of Texas report that divided the Internet economy into four layers: Internet, Application, Intermediary/Market and Internet Commerce. The Internet accounted for US$115 billion of business in 1995, he said. Internet Commerce accounted for US$301 billion in 1998.
"We're seeing a rapid evolution of business models," he said. "The pace of these transitions will accelerate."
Chambers also addressed the rise of voice-data convergence, which concerned one audience member, who pointed out the recent telephone company outages across the country.
"If my dial tone had been connected to my Internet connection, I would have been out of business," the customer said. "Now that we're connected, we're going to have a single point of failure, and that worries me."
Asked what he thought of the wireless market, he said he expected it to explode in the same way.
