Dow Jones Newswires -- October 1, 1999
DJ Cisco Systems' Chambers Says Tech Stocks Not Overvalued
By Ann Keeton
CHICAGO (Dow Jones)--John Chambers, chairman and chief executive of computer networking giant Cisco Systems Inc. (CSCO), said Thursday he doesn't think technology stocks are overvalued.
"Over a period of three-five years, I think Internet stocks will outperform the market as a whole," Chambers said. Nevertheless, he said, there may be some Internet startups that "crash and burn" in the meantime.
Continuing to look into the future, Chambers told a meeting of the Executives' Club of Chicago that in 2003, consumers will make up as much as 30% of an Internet business that could reach $1.1 trillion. Chambers said analysts' forecasts of consumer participation of less than 10% in Web commerce dominated by business-to-business sales is too conservative.
"Internet technology has been around for two to three decades, but it's only in the last 18 months that it has really begun to take off," he said.
While competition has been a driving force behind business use of the Internet, Chambers said consumers will begin to log-on in earnest only when high-speed connections are available in their homes. After that, Chambers said, "everything in the home will be connected."
Chambers equated the fast pace of "Internet years" to "dog years," with one calendar year equaling seven years in the life of the Internet.
While Chambers' predictions for the virtual world are ahead of the pack, results at his own company have consistently outpaced the field. In August, the company said its earnings would be a penny better than Wall Street expectations for the calendar fourth quarter (Cisco's fiscal second quarter) and the year, coming in at 21 cents in the quarter and 75 cents for the year. That would be even better than First Call/Thomson Financial's consensus estimate among analysts of earnings growth of 30% over the next five years. Chambers Thursday declined comment on expectations for the current quarter, the results of which will be reported the first week of November.
In the year ended in July, Cisco's revenues were $12.2 billion, and analysts see that number growing 37% this year to $16.6 billion.
Chambers said the Internet has already transformed business models. At Cisco, where most business with customers is conducted on the Internet, he said that "every time our customers change their needs, we transform our business. That means we've changed our business seven times in less than 10 years."
Answering audience questions, Chambers said he has only one fear for Cisco in the highly competitive world of Internet service providers. "You can't get too far away from your customers. I spend 50% of my time with customers."
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