1/4/2005 -- What’s in store for Cisco in 2005? If several of the company’s recent moves are any indication, a focus on the Japanese marketplace, for one.

Late last year, Cisco forged an alliance with Japanese networking and computing giant Fujitsu to undertake joint development of high-end routers, cooperate in routing and switching, and collaborate on continuous quality improvement, enhanced support and service.

Just as important, analysts said, was the fact that Fujitsu is a prominent provider of optical networking solutions in Japan.

“The combined efforts of Fujitsu’s expertise in optics and high-reliability technologies plus Cisco’s depth in IP routing applied together can address the needs of Japan’s exploding IP networks,” said Glen Hunt, a senior analyst with consultancy Current Analysis Inc., at the time.

Also last month, Cisco announced its intention to open a new R&D center in Tokyo, Japan, in February of 2005. The networking giant plans to staff the new facility with as many as ten engineers and expects to invest about $12 million in the effort over the next five years.

In recent months, Cisco has disclosed plans to open a similar R&D center in Beijing, China. In this case, Cisco officials say, Tokyo was selected because of the explosive growth of broadband services -- 500 percent per year -- in Japan, which could drive demand for Cisco’s new CRS-1 Carrier Routing System.

According to Jeff Ogle, a principal analyst for carrier infrastructure with Current Analysis, Cisco has several motivations for making a move of this kind. “Cisco is taking this step as both a tactical response to the unique needs of the Japanese market and a strategic response to better position itself to become the major supplier of Core IP routers for the Japanese marketplace,” he writes. “This step is only one in a series of Cisco executing on its strategy of allocating resources for market opportunity.”

At the same time, Ogle notes, the Japanese market isn’t exactly bereft of competition. “In-country players like Hitachi and NEC have formed a joint company, ALAXALA, whose sole purpose in life is to design the lower-end routers for the Japanese market,” he pointes out. “Juniper, the other serious IP core router competition for Cisco, is also an established player in the Japanese market with several key and strategic partners that include both Hitachi and NEC as well as some local in-country players like Takachino Koheki that have a long and established track record of successfully bringing outside products into the Japanese market.”

Other potential competitors include Avici, the products of which are distributed worldwide through partners Nortel and Huawei. Neither company has a strong history in Japan, but this could change, Ogle warns.

On the whole, Ogle says, the move leaves Cisco well-positioned to take on these competitors and others. “Even though the center will be staffed with only ten engineers to start, Cisco will be able to attract some of the most talented engineers available,” he writes, noting that this advantage probably won’t pay immediate dividends for Cisco, however: “Development engineers take approximately six months to come up to speed in a new environment before becoming fully productive. If new tools and programming techniques need to also be learned this time can easily extend, placing new feature development for the Japanese market almost one year away." -Stephen Swoyer