Cisco Gives Analysts View of Big Picture

Seeks to allay Wall Street concerns by revealing approach to business

Cisco Systems Inc., a company that often clouds business and technology initiatives in a veil of linguistic smoke, broke with tradition last week at its annual global analyst conference here in its hometown.

After reassuring the 500 analysts in attendance that there would be no change in guidance, which in Wall Street parlance means that Cisco's revenue and earnings forecasts remain on target, Cisco President and CEO John Chambers and key managers discussed how Cisco crafts its strategies.

Chambers said he wasn't really concerned about Cisco's stock price, which, on the day he spoke to the wary audience, was down $37 from its high of $82 earlier in the year. In fact, negative perceptions fostered by a sagging Nasdaq Stock Market are helping Cisco advance its market share, Chambers said.

Jeremy Duke, an analyst at Synergy Research Group Inc. in Phoenix, said he agrees. "The market is seriously disconnected with what's going on [at Cisco]," he said.

Cisco's revenue was $21.4 billion for the past four quarters through Oct. 28.

Breaking Away

Cisco's marketing strategy, Chambers explained, is to look for "points of inflection, disruption or transition," either in markets or technology where the company can break away from the pack. One of those points, he said, is the transition from separate networks for data and voice to a single network based on IP systems. Such systems, Chambers said, are cheaper and easier to deploy and can offer better functionality than circuit-switched telephone systems.

Mary Sunderland, a portfolio manager at Invista Capital Management in Des Moines, Iowa, said Chambers was more explicit about Cisco's modus operandi than he has been at previous conferences.

"The breaking-away theme with a focus on disruption as opportunity is new for Cisco," she said. "It seems to apply to Cisco's desire to dominate the service provider market."

In the future, Chambers said, large firms will blend services and transports from their own enterprises with those from application service providers, Web hosting companies and telecommunications firms to create seamless intelligent networks.

Chambers said Cisco's approach to execution is based on "sustainable competitive advantages of speed, talent, brand and culture." The speed, he said, comes from practicing internally what the firm preaches to its customers, such as facilitating 80% of its sales through the Web and operating a network that can give managers a snapshot of Cisco's financial state within hours.

Speed applies to integration of new acquisitions, too, Chambers said. "We are now equipped to integrate 10 acquisitions a month if we need to," he said.

But Duke said Cisco still has work to do to compete with service providers such as Nortel Networks Corp. and Lucent Technologies Inc.

Cisco at a Glance
Amid analyst skepticism, Cisco is forecasting 50% revenue growth for next year.

Profit of $1.36 billion for the quarter ended Oct. 28, up 67% from the same quarter last year
Acquired IPmobile Inc., HyNex Ltd., Komodo Technology Inc., Netiverse Inc. and NuSpeed Inc. for a combined total of $1.37 billion in the quarter ended Oct. 28
Acquired Atlantech Technologies Ltd., JetCell Inc., PentaCom Ltd., Qeyton Systems and a subsidiary of Seagull Semiconductor Ltd. in the quarter ended July 29 for a total of $1.39 billion

Copyright © 2000 IDG Communications, Inc.

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