One On One With John Chambers, CEO Cisco Systems
Tuesday, May 09, 2006
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SUSIE GHARIB: A solid quarter of earnings for Cisco Systems today. The world`s largest maker of Internet gear posted earnings of $0.29 a share in its fiscal third quarter, $0.03 more than estimates. Cisco`s revenues also came in higher than expected, up 18 percent to a record $7.3 billion. A big contributor to that jump in revenues came from Cisco`s acquisition of Scientific Atlanta, the maker of cable TV set top boxes. Looking ahead, Cisco expects revenue growth in its fiscal fourth quarter in the range of 18 to 21 percent. And joining us now, Cisco CEO John Chambers. Hi, John.
JOHN CHAMBERS, PRESIDENT & CEO, CISCO SYSTEMS: Hey, Susie, good to see you again. Thank you for having me on your show.
GHARIB: Pleasure to have you. Congratulations on a strong quarter.
CHAMBERS: Thank you.
GHARIB: I want to ask you where your guidance looking ahead actually, 18 to 21 percent is your guidance. What`s going to drive that growth?
CHAMBERS: Well, part of it is because Scientific Atlanta was not in our numbers the year before. So our guidance for the next quarter without Scientific Atlanta would have been 10 to 12.5 percent guidance. That`s very much in line with what we`ve said before and very much in line with what we said this quarter as well. So we had a record revenue quarter as you articulated, a great earnings quarter and we are very optimistic going forward in terms of the balance of our products, our geographic areas and our key markets such as service provider, enterprise and commercial. So we seem to be hitting on all the cylinders.
GHARIB: You`re optimistic but investors weren`t. The stock was up on the announcement, up 4.5 percent initially and then it pulled back and went down. What`s the story there?
CHAMBERS: Well, Susie, I think you will always see Cisco be conservative and that`s what we have traditionally done over the years. We share with people what is our vision in terms of how the market`s going to evolve, what`s our strategy within that vision and then here`s how we`re executing. The market`s evolving exactly like we thought in terms of the network becoming the key to communications and IT, intelligence throughout the network, that you get this leadership by doing it yourself by acquiring and partnering and that we`re winning around the world. So good market share gains, et cetera. I think the market also at times perhaps reads a little bit too much into our conservativism (sic). We had a great quarter. Order rates were in the mid-teens. That`s as strong as we`ve seen on balance in many long time. We have not seen the concerns that perhaps some of our peers are. So I think there`s a little bit of caution in the market and actually at Cisco, we tend to be a little bit conservative in our position.
GHARIB: What is it... I`d like to follow up with you on that about the caution that some of your peers have been expressing. What is it that perhaps they`re seeing that you`re not seeing? You said today you might not be immune from the concerns that they have, but you won`t know for a while yet.
CHAMBERS: Well, Susie, you will always susceptible to changes in the market, GDP, et cetera. But at the present time, it looks like there`s a natural rotation occurring in terms of customer spends where they`re spending more on the network and related issues which help them change their business model, achieve their productivity, help in this quad play if you will of data, voice, video with mobility, not just in service provider but in the enterprise. So I think we`re getting increased share spend out of enterprise customers, service providers and the commercial segment. So the only caution we had is a note that while our orders were really good, we do not see the concerns that our peers are seeing at this time but you always want to remind people that you`re not immune to any downturns. At the present time however, it looks like we`re hitting on all cylinders in terms of our vision and our strategy and we feel very good, Susie.
GHARIB: You also said that because of this optimism that you`re going to be adding resources aggressively, that`s to quote you. Where are you going to be putting those resources? What new growth opportunities?
CHAMBERS: Well, we`ve seen tremendous growth opportunities in what we call our emerging markets. They`re only 10 percent of our business today but they actually grew year-over-year at 40 percent. So tremendous growth rates in terms of positioning. We`re also going to do a lot of internal development, if you will. Some new areas of technology, internal startups, areas that we`ll talk about in the future like tele presence which really is an extension of unified communications where you combine data, voice, video and mobility, this quad play that I referred to earlier. We also will be helping our customers implement our technology more effectively. So key resource investments, sales, engineering and what we call advanced services.
GHARIB: Seems like you have a really long agenda there. Thank you so much, John for coming on the program.
CHAMBERS: Susie, it`s a pleasure as always. Have a great day.
GHARIB: We`ve been speaking with John Chambers, CEO of Cisco Systems.
