Chambers 'Never' More Comfortable With Cisco Outlook (Update5)
By Vivek Shankar
Sept. 16 (Bloomberg) -- Cisco Systems Inc. Chief Executive Officer John Chambers said he's "never" been more comfortable with his long-term forecast, reassuring investors that network- equipment demand will hold up amid an economic slowdown.
Cisco will meet its target of 12 percent to 17 percent annual revenue growth over the next few years, Chambers told analysts today in San Jose, California. Cisco, which missed that range in the past two quarters, has predicted a sales increase of 8 percent this period and 8.5 percent in the next.
The comments contrast with a prediction today by Dell Inc., the second-largest personal-computer maker, which expects a ``further softening'' in demand. Cisco, the biggest maker of networking devices, will make more money from its TelePresence videoconferencing system, as well as from phone and cable companies expanding networks to handle video, Chambers said.
``We've been conservative over the last few quarters,'' said Chambers, 59. ``When we make very aggressive, bold statements -- if you look back three to five years later -- we've almost always achieved those.''
The company's customers still expect the economy to rebound in the first half of next year, Chambers said, reiterating a previous projection.
Cheaper Startups?
The drought of initial public offerings has made it cheaper to acquire startups, Chambers said, since young companies have fewer options. Startups cost a fourth of what they did a year ago, said Chambers, who didn't say if Cisco was making any acquisitions.
Businesses will respond to Cisco's TelePresence videoconferencing system, which costs as much as $299,000, in the same way that consumers reacted to Apple Inc.'s iPhone, boosting orders, Chambers said. TelePresence sales may reach an annual rate of $1 billion by the second half of 2009, said Senior Vice President Marthin De Beer.
Cisco, based in San Jose, rose 42 cents, or 1.9 percent, to $22.80 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has declined 16 percent this year.
In August, Cisco reported fourth-quarter profit that beat analysts' estimates by a penny and said sales this quarter and next would be in line with projections. Revenue surpassed $10 billion for the first time.
Economic Pressure
Cisco may continue to see economic challenges for the next few quarters, Chambers said at the time. Last November, he said a ``dramatic'' drop in demand from U.S. financial and auto companies had curbed sales growth.
By 2012, online videoconferencing traffic alone will be five times the amount of Internet data in 2000, Chambers said.
Half of the network capacity used by Cisco's employees comes from use of TelePresence videoconferencing systems, said De Beer, who heads the emerging technologies group. Cisco has 200 TelePresence customers and has orders for 1,000 more systems, he said.
The company is now selling 50 of its CRS-1 routers a week, Chambers said. At its introduction in 2004, some analysts had predicted that the product, which allows telephone companies to provide video applications, wouldn't get more than 50 orders in total, Chambers said. The CRS-1 is Cisco's most expensive router.
Bellwether Company
Investors consider Cisco to be a barometer for the technology industry because it dominates the market for routers and switches, which direct and control the flow of data over networks.
The Standard & Poor's 500 Information Technology Index, which consists of 72 technology stocks, fell 3.6 percent yesterday after Lehman Brothers Holdings Inc. filed for bankruptcy and Merrill Lynch & Co. agreed to a merger with Bank of America Corp. The S&P technology index reached an intra-day 52-week low of 317.47 today.
The economy will slow to a 1.2 percent annual growth rate this quarter, or less than half the prior period's pace, according to a Bloomberg survey.
Almost half of big corporations globally have curbed technology budgets for the next year to help cope with the economic slump, Forrester Research Inc. said last week. About 43 percent of businesses have reduced spending plans, with more cuts taking place in the U.S. than in Europe, the Cambridge, Massachusetts-based researcher said.
To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net
Last Updated: September 16, 2008 20:07 EDT |
