Cisco Systems Inc. share price down, shifts focus towards cloud computing services to join the competition

Cisco Systems Inc., which has been mainly focused on networking hardware market, officially announced that it plans to start offering the so-called “cloud computing” services to corporate customers by entering the cloud computing market, which is currently dominated by Amazon.com Inc., the largest online retailer in the world.

The company said that it intends to spend about 1 billion dollars over the next two years on building data centres for the new undertaking of the company, which is to be called Cisco Cloud Service. The latter will also take advantage of computer rooms, which are operated by some of the companys partners.

As reported by the Wall Street Journal, Ciscos President of development and sales Mr. Rob Lloyd said: “Companies are looking for different ways to get IT done. Everybody is realizing the cloud can be a vehicle for achieving better economics and lower cost.” Part of Mr. Lloyds statement was also cited by Reuters: “It does not mean that were embarking on a strategy to go head-to-head with Amazon.”

According to Ciscos statement, business customers would be provided with the opportunity to take advantage of computing power when it comes to a variety of information-technology tasks. Over the last few years, the demand for equipment has been reduced due to a mass shift to cloud computing services. This has proved out to be a successful strategy for many companies, which are trying to deal with decreasing budgets and slowing sales.

The companys annual revenue has been said to be about 49 billion dollars. Until now, it has been generated predominantly by selling equipment, but Cisco has reconsidered its strategy and is now becoming more focused on the cloud computing market, which has recently become more and more popular among a great number of companies.

Cisco is reported to be planning to tailor its services in order to exclusively work with software offered by companies such as Microsoft Corp, SAP AG and Vmware Inc. The company is also said to be considering the idea of selling its cloud services to telecom companies at a later stage.

Cisco Systems Inc. fell by 0.87% on Friday to close the session at $21.64 per share, marking a one-year change of +4.29%. The company is valued at $111.47 billion. According to CNN Money, the 34 analysts offering 12-month price forecasts for Cisco Systems Inc. have a median target of $24.25, with a high estimate of $30.00 and a low estimate of $16.00. The median estimate represents a +12.06% increase from the last price of $21.64.