Cisco restructures with focus on China

NEW YORK, USA: U.S. network equipment maker Cisco Systems Inc is restructuring its management in Asia to create a new segment for China, in a nod to the region's increasing importance.

Cisco said China, Hong Kong and Taiwan, formerly part of its Asia Pacific operations, would become a separate "Greater China Theater", effective February.

Analysts said Cisco's move underscores the importance of the region, but will have little impact on domestic players such as Huawei Technologies Co Ltd and ZTE whose products share little overlap with the U.S. giant.

"Cisco has been selling in China for a number of years. This move is to really focus more on China," said Hong Kong-based JPMorgan analyst Charles Guo.

Guo estimates the amount of revenue ZTE earns from products which overlap with Cisco's to be around 10 percent, and for Huawei, at 10-15 percent. The two companies specialize in making telecommunications equipment.

Cisco said in a statement the remaining countries in the Asia Pacific region will form an "Asia Pacific Theater" excluding Japan, which will remain a separate segment.

"Given the size and growth of the Chinese economy and our significant commitments to our China business, we believe designating Greater China as its own theater marks an important next step in our strategy," Robert Lloyd, executive vice president in charge of worldwide operations, said in the statement.

Cisco said revenue from the Asia Pacific contributes around 15 percent to its total sales.

Last month, Cisco CEO John Chambers said the company was ready to bolster its presence in China, where it faces tough competition from local players.

In November, Cisco announced plans to buy the set-top box business of Hong Kong-based DVN (Holdings) Ltd, its first acquisition aimed at the Chinese market.

Lloyd told Reuters last month that the company's planned expansion in China would include more investment, including hiring and, possibly, more acquisitions.

Cisco ended its previous quarter with more than $35 billion in cash and investments, and while it has since announced multiple deals it has said it is ready for more. With most of its cash held overseas, Chambers has also said it made sense that its acquisition strategy was becoming more global.

The new Greater China segment will be led by Owen Chan, who has been president of Cisco's Asia Pacific region for the past five years and will now be relocating to Beijing from Hong Kong. He will report to Lloyd.