Cisco also continues to use its financial clout to aggressively enter new markets, and currently has 30 clearly identified "market adjacencies" to pursue. While on the surface it may seem that the company is biting off more than it can chew, Cisco believes it will be successful in pursuing market adjacencies even if it meets or exceeds its targets on only half of its earmarked markets. On the flip side, Cisco does appear to be suffering some market share losses in conjunction with UCS, as former server allies HP and IBM go looking for new dance partners. However, patience has been Cisco's mantra, and TBR believes that the company is willing to sacrifice some short-term market share in order to stay the course with respect to its long-term market strategies.

TBR also believes that despite the share decreases, Cisco is still very well-positioned in many of its market segments, as new business and consumer applications (particularly video-based) continue to drive IP traffic growth and place even higher demand on service provider and enterprise networks. What remains to be seen is how Cisco's acquisition strategy for 2009 will play out, given that the company had no M&A activity during 2Q09 and has bought only two companies so far this year (both in 1Q09). Considering the company has increased R&D as a percentage of revenue by 2.5% from 2Q08, it appears that Cisco is currently focusing on organic growth through product development and innovation. www.tbri.com.