Cisco NZ sparkles, parent flounders

By ADAM GIFFORD

The New Zealand arm of networking technology giant Cisco Systems has reported 20 per cent growth and record profits for the year, despite the parent company's booking a $US1 billion ($2.27 billion) loss.

Country manager Tim Hemingway said NZ lived up to its reputation as an early adopter of new technology, with strong sales of internet telephony and wireless technology boosting earnings.

"We've done more than $2 million worth of IP (Internet Protocol) Telephony sales in the last three months into the education, health, manufacturing and retail sectors and have one major multimillion contract about to be concluded," Mr Hemingway said.

He said the Ministry of Social Policy's IP telephony system, connecting 8000 staff in 200 offices around the country, was a ground-breaker.

"At the time it went in, it was the largest such system worldwide apart from Cisco itself. Now we have some of our largest customers doing it - Dow Chemicals' Downet has 50,000 users all round the world."

The advantage for organisations is that IP telephony can piggyback on existing data networks, and can quickly return its investment through lower phone bills.

"We're also getting interest from service providers, who are looking to offer their customers IP telephony as a managed service."

IP telephony applications grew from 10 per cent to almost 25 per cent of Cisco's business in New Zealand, and Mr Hemingway is picking it to rise to 40 per cent this year.

Wireless accounts for 7 per cent, up from 3 per cent at the start of the year.

Ninety-five per cent of Cisco's New Zealand business is done online, compared with the 80 to 85 per cent it aims for worldwide.

Mr Hemingway said voice-over IP was the third "technology tsunami" Cisco had been involved in.

"When I came to the company it was routing, then switching. Now we are ahead of this wave, while the competitors are just now walking in."

He said that although the global loss, the first in the company's 11-year history, was a blow, it was caused by a more than $2 billion writedown of inventory.

"We're looking for double-digit growth again this year, with a third of the revenue coming from IP telephony, so we're diversifying the revenue even more."

However, not all business is good business. Cisco withdrew from tenders to supply ethernet switching and telephony systems for PriceWaterhouseCoopers' new Auckland waterfront offices, a million-dollar piece of business, despite being short-listed.

Mr Hemingway said the consulting firm's decision to negotiate a price with equipment suppliers before engaging in a second negotiation with installation and maintenance companies was at odds with Cisco's partnership approach.

"The way we work in this market is we manufacture products and then work with partners who can sell, configure and service them. Everyone needs a margin to be able to provide the ongoing services."