One on One with John Chambers, CEO Cisco Systems
Wednesday, November 08, 2006
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SUSIE GHARIB: A blockbuster quarter for Cisco Systems which reported record quarterly profits and sales after the market close today. The world's largest maker of Internet gear posted earnings of $0.31 a share in its fiscal first quarter. That was $0.02 more than estimates. Cisco's revenues also came in higher than expectations, up 25 percent to $8.2 billion, $300 million more than estimates. Contributing to that sales gain, Cisco's acquisition earlier this year of Scientific Atlanta, the maker of TV cable boxes. The stock surged as much as 7 percent in after hours trading after closing at $25.10 in the regular session. Joining us now, Cisco CEO John Chambers. Congratulations John on a great quarter.
JOHN CHAMBERS, PRESIDENT & CEO, CISCO SYSTEMS: Susie, thank you very much. It's a pleasure to be on your show again.
GHARIB: You told analysts on the conference call after your announcement today that you're forecasting between 24 and 25 percent revenue growth for the second quarter, the current quarter. That's really big. What's going to be driving that growth? Where is it coming from?
CHAMBERS: This is kind of the exciting thing about our announcement today, and really where Cisco finds itself in the market. We're growing in all of our key geographies, whether it's in emerging markets, Europe, North America, Asia. We're growing across all of our products. It's not so important their names in terms of routing and switching and new advanced technologies and services, but the balance is really good. And we're growing in large customers, small customers, the home market place and service providers. So it is that balance Susie that is so unique. But perhaps the key takeaway is the network's changing from something that you travel through, to it's going to, in our opinion, become the enabler of all forms of communications and IT, which is a nice way of saying whether you're in the home marketplace as a consumer or you're on the business side of the house, the role the networking will play in your future becomes more and more important and (INAUDIBLE) Cisco executes well, our growth should be there.
GHARIB: So I guess that CEOs and chief investment information officers have been budgeting for technology spending. What are they telling you when you meet up with them?
CHAMBERS: I think that more and more of the CEOs and government leaders as well are understanding not just technology but especiallynetwork technology will enable their ability to be more competitive in this global environment, to drive productivity more, to enable better service if you're in government to the citizens. So in many ways technology and especially network technologies (INAUDIBLE) in terms of former (ph) government or business, it just enables us to do our business better, to be entertained (ph) better or to provide services such as health care and education more effectively on a global basis.
GHARIB: How about economic conditions? How is the U.S. economy helping or holding back your business?
CHAMBERS: Well, we view the U.S. economy as solid. We were a little bit more cautious than some of our peers were two quarters ago, a little bit more optimistic a quarter ago, and this is how kind of Cisco views the market. We don't react to the ups and downs and I think that allows to us plan three and five years out. We see the U.S. economy at the present time as coming in for a soft landing. Time will tell if that's right or wrong, but our business in the U.S. was extremely solid, growing at about 19 percent year over year, growing 30 percent in service providers, 20 percent in the enterprise marketplace, 20 percent in the commercial marketplace, and in the single digits in the consumer Susie. So again, it was that balance (INAUDIBLE).
GHARIB: That's very impressive. There has been considerable discussion about what impact yesterday's elections in the change in Democratic leadership in Washington is going to have on American business. In your view, what impact do you think the changes in Congress are going to have on American business?
CHAMBERS: Well, let me just talk about my area of expertise. From the technology perspective, which political party is in power is kind of an agnostic (ph) issue. In other words, the Democrats and Republicans both view the value of high-tech as being very large. Secondly, they view the value of networking, whether it's for education or health care or in business as being very positive. So whether it's in this country or around the world, I think you find that government leaders, regardless of their political party or form of government, are very positive on technology, especially on networking technology and Cisco forms very tight relationships with government leaders.
GHARIB: But in that sense, do you think any change in U.S. government spending or war priority spending will impact Cisco in particular?
CHAMBERS: Well, we do well, regardless of where the spending goes. Our Federal business was up 10 percent this last quarter. Our balanceacross the globe was very good. So wherever they spend money, usually we'll get our fair share if we execute well, and that really speaks to the changing role that Cisco and the network is going to play in the future in terms of spending for communications.
GHARIB: All right, well, good luck with everything this current quarter. Thank you for coming on the program.
CHAMBERS: Susie, it was a great pleasure to be with you. Thank you again.
GHARIB: Thank you so much. We've been speaking with John Chambers, CEO of Cisco Systems.
