CISCO--10 Questions With Gartmore Millenium Growth's Aaron Harris
By Ian McDonald
Senior Writer
10/9/00 11:23 AM ET
This has been edited for questions pertaining to CSCO. (dealie)
McDonald: Part of the turnover is probably driven by inheriting someone else's portfolio, right?
Harris: Exactly. That was my next point.
One company I haven't mentioned is a semiconductor company that makes silicon and puts their software on chips. It goes into DSL, and they're selling to Lucent and some of the DSL providers. It's a company called Globespan (GSPN:Nasdaq - news). It's a little bit of a smaller cap (than) Extreme (or) Juniper. Actually, one I haven't mentioned -- if you put a gun to my head and say five years from now -- it'd probably be Flextronics (FLEX:Nasdaq - news).
They're a contract manufacturer. So, they are outsourcing the hardware components of the product for Motorola, Cisco, Ericsson. If Cisco has a new product, they go to Flextronics and use their manufacturing capabilities, and they'll put Cisco's label on it and sell it. This company, five years ago, was the number 24 or 25 contract manufacturer in the world. They've done such a great job with people's products that now they're the number 3.
They've really been executing. They've made some acquisitions, but they're really focusing on outsourcing for networking and telecommunication equipment. That represents over half of their business. Motorola just recently signed a $30 billion deal over the next five years with Flex. This is interesting: I heard that the relationship between Cisco and Flex is so strong that every three days Flex produces a new Cisco product.
They've got about 150 or 200 products that Cisco has done with Flextronics. So, they continue to execute, visibility's great there. The trending for this type of outsourcing is going to continue, because the Motorolas, Ericssons, Ciscos don't want to be in manufacturing. They want to be in the technology business where they're focusing just on the core technology and outsourcing the actual manufacturing. So, that trend is going to continue. |
