Is Future Economic Downturn good for Cisco ?

During last downturn (2001-2003) Cisco stock price went from $80 down to single digit value ($8 - $9). Cisco had to write off around 2.5 Billions dollars and had to reduce the head count by approximately 15%. Overall picture was not pretty for Cisco. But last economic downturn turns out good for Cisco.
 Cisco gained the Market share from the competitors.
 Cisco competitors became weak and some even went out of business. For example Nortel, Lucent, Alcatel became weaker during the downturn. Companies like 3Com, Sycamore, Ciena etc barely survived. Whereas many new startups like Procket Networks etc could not survive
 Cisco got time to develop and harden new products. CRS-1, ASR-1000, MDS etc were developed and hardened during downturn and now are the key product lines for Cisco.
 New startups developing new technologies became cheap and Cisco could pick these up at discount price.
 Cisco entered into new market by acquisition and internal development. Cisco acquired SA (Scientific Atlanta), Linksys to enter into consumer market, acquired Webex for online collaboration. Developed new systems for Telepresence market.
 Cisco transitioned into itself into global company. Cisco established development center around the world both to take advantage of lower development cost and wider talent pool. Cisco sales and support now covers most of the world.

So looking now, last economic downturn turned out to be good for Cisco and helped Cisco to consolidate is market leadership position. Now again economic conditions are becoming cloudy in US and may spread to rest of the world. How would this downturn impact Cisco? Will it be beneficial to Cisco as last one or could cause some issues for Cisco in short or long run. Let us look at favorable and non-favorable factors for Cisco during next possible economic down turn. Let us look at the Cisco advantages first
 Cisco is sitting on large pile of cash and cash is definitely king during bad times. Cisco not only can use this cash to continue operating and developing new products, but also can use cash positions to buy companies and technologies to increase product portfolio and market breadth.
 Cisco is well recognized brand name all over the world and undisputed leader in networking.
 Cisco is global company. Cisco gets half of its revenue outside of North America. Impact of slow down in one part of the world does not have major impact on the revenue and earning. Cisco workforce is also spread around the world to take advantage of world talent pool and it is among the top 10 employer in most part of the world. Due to geographical employee diversity, any political and financial disturbance in one part of world will not freeze the company operations.
 Cisco has wide range of products to cover service providers, enterprises, consumers and services. Routers and switches now just the half of the Cisco revenue. Advance technologies and services are gaining more shares in Cisco revenue. Which means growth (advance services) and stability (services) for Cisco revenue.
 Cisco has well recognized leadership. Cisco’s CEO, John Chambers is well recognized and respected figure in industry. Cisco also built the management depth to run the business smoothly.
These are the great advantage for a company any time, specifically during bad economic environment. But there are certain things Cisco needs to watch out and can be major dragging factor during down turn.
 Cisco is already leader in core products (Switches, Routers etc). Cisco growth is dependent on the new products and market like consumers (living room experience), collaboration (WebEx etc), video, mobility etc. Cisco will have to compete with players with deep packet like Microsoft (unified communication), Hewlett Packard (video collaboration), Apple, Sony/Motorola (living room set top box) etc for these Market. So it would be very hard to beat these players.
 Cisco is not well recognized consumer brands compared to other players like Sony, Apple, Panasonic, Microsoft, Motorola etc. Cisco will not have any branding advantage in consumer market. It would be harder for Cisco to establish itself into consumer market. Also Cisco does not have much experience is consumer market, where volumes are high but profit margins are low. This does not fit well into Cisco current profit margin structure.
 Cisco is now another big company. It is not as lean and agile it used to be during last down turn. So it reaction time could be slower this time.
 Though Cisco is among top 10 employers, but there is increasing discontent among employees (source www.glassdoor.com) about career prospects and growth. This is new disadvantage, which was not there during last down turn.
 Some of the tough competitors (like Juniper, Foundry, Avaya etc) are still around, which are still competing against the Cisco’s core business and it would be harder for Cisco to grab more market share from these players. Other new players like Huawei, Dell, HP etc are competing against Cisco core business (switches, routers) based on the lower prices.

To come out stronger on other end of the economic down turn, Cisco has to manage these negative factors. Also events like world wide recession, technological disruption (impact of social networking, video mobility etc), business alignments (like set top integration into TVs) can make life tougher for Cisco. Worst case scenario is that Cisco does not get any of new market opportunities and looses some of its core business. In best case scenario, not only it gains new market opportunities, but also gains share on existing market. All depends on how Cisco manages risks during next possible down turn. In my personal opinion, Cisco will be some where in the middle and next down turn will not help in Cisco major way. So during next down turn, Cisco will not be benefited as it did last time.