SCOTTSDALE, Ariz. (Dow Jones)Cisco Systems Inc. (CSCO) Chief Executive John Chambers said he expects the network equipment maker to make "dramatic" gains in market share in its fiscal second quarter.
Chambers told investors at a Salomon Smith Barney conference in Scottsdale, Ariz., the company's recent market share gains were the best in company history.
In recent months, as the network equipment industry has suffered through a downturn, Cisco has grabbed market share from its smaller rivals. In sales of Internet routers, Cisco saw market share rise to 65% in the three months ended Sept. 30 from 60% in the previous quarter, according to research firm Dell'Oro Group. At the same time, Juniper Networks Inc.'s (JNPR) share fell to 32% from 35%, reversing a two year trend of market share gains.
Even as the company gains share in the shrinking market for communications equipment, "visibility for Cisco is still limited," he said. "Most customers really don't know" when they'll begin to boost spending on equipment and networking.
Visibility in the overall economy also remains limited, he said, although more chief executives whom Cisco has spoken with are optimistic than were before Sept. 11. Still, he said, 60% of chief executives don't expect economic improvement until after the summer of 2002.
He did not offer financial projections. Late last year Cisco predicted that revenue for the second quarter ending Jan. 31 will be about $4.5 billion, roughly unchanged from the first quarter.
Cisco will probably acquire between eight and ten companies this year, Chambers said, as the company returns to its 1990's strategy of letting customer requests dictate its expansion strategy. Cisco generally prefers to enter new markets through internal product development rather than acquisition, he said. However, when a customer states a preference for a given small company with a product that Cisco lacks, Cisco may acquire that company, Chambers said. Cisco will use a combination of cash and stock to fund such acquisitions, he said.
Cisco has $19.1 billion in cash, and can increase its cash by $1 billion to $1.5 billion a quarter, he said.
Chambers said that Cisco is unlikely to make acquisitions to add capabilities for systems integration or consultancy businesses, although many customers are asking for services in those areas. Entering these areas could pit Cisco against large companies like International Business Machines Corp. (IBM) "that play a huge role in our success."
Cisco hopes to expand its fledgling consultancy business through strategic partnerships rather than acquisitions, Chambers said.
The company's sales in the areas of gigabit Ethernet service and storage area network technology are strong, he said.
In the global technology market, he is seeing demand in Europe while the U.S. market is still struggling. China is, for the first time, suffering from the U.S. recession. He expects between three and five more "challenging" years in Japan.
Christine Nuzum; Dow Jones Newswires; 2019385172; christine.nuzum@dowjones.com
Peter Loftus; Dow Jones Newswires; peter.loftus@dowjones.com
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(This report was first published late Tuesday.) By Christine Nuzum and Peter Loftus Of DOW JONES NEWSWIRES |
