One on One with John Chambers, Chairman & CEO of Cisco Systems
Tuesday, May 08, 2007
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SUSIE GHARIB: More now on those Cisco earnings. Joining us, John Chambers, chairman and CEO of Cisco Systems. John, nice to have you on the program.
JOHN CHAMBERS, CHAIRMAN & CEO, CISCO SYSTEMS: Susie, as always, it's my pleasure.
GHARIB: You report these record earnings and also revenues and the stock goes down 5.5 percent in after hours trading. What's that all about?
CHAMBERS: Well, I think, Susie, as long as we get the growth and we continue to grow at the growth in the mid-teens which we've experienced and continue to produce record earnings, the stock will take care of itself. Every once in a while, somebody's expectation gets ahead of our ability to deliver. But when you look at this quarter in terms of the balance around the major geographies around the world, 19 of 20 products growing at faster than 10 percent year over year. Our customer segments from service providers to commercial enterprise all in good shape. It doesn't get much better than that. And I think the stock will take care of itself over the long run if we continue to produce at the level we did today.
GHARIB: In fact everything that you said on your conference call in conversations with analysts was very strong and positive. One of the things that I noticed that you said that the order growth is strong. So I'm just wondering, what is your read on tech spending from your big customers?
CHAMBERS: Well, what we're seeing is a larger percent of tech spending both from service providers, large enterprise customers or small to medium business is going into the network. So we're getting a larger share of their total spin. There are two take aways from that. First, the investments we made in the past are really going well. But secondly there's about to be, if we're right, a major wave, a second wave of the Internet growth built around collaboration and web 2.0. Web 2.0 is simply the technologies that enable collaboration, whether it's personal collaboration at home or whether it's business collaboration. So I think we're at the beginning of probably the second biggest wave the Internet has seen. Time will tell if we're right or wrong on that.
GHARIB: Now are you finding that same kind of interest in tech spending in your international markets?
CHAMBERS: Actually, outside the U.S. is growing faster than inside the U.S. The emerging countries globally grew 40 percent for us this last quarter. So whether you're eastern Europe, Russia, CIS, Middle East, Africa, Latin America, India, et cetera, the growth rates are much faster than even here in the U.S. So there's unusual balance. And instead of the emerging markets trying to catch up to the developed markets, they're actually skipping a generation. So our global business was extremely good. Asia Pacific grew at approximately 20 percent. Europe grew at the low teens again, which has been very good, strongest growth we've seen in Europe in several years.
GHARIB: Now I noticed in this last quarter you made one pretty good- sized acquisition for your company, $3 billion, Web X. You have $22 billion of cash. Given all this growth that's going on in your company, do you expect to make larger acquisitions going forward?
CHAMBERS: Well, Susie, my ideal target for an acquisition is actually 100 engineers in a company that's just going to go public or bring their product to market. Our customers tell them who we should focus on. What is unique about Cisco is we do internal innovations very rapidly. We do acquisitions very successfully and I think you will see us continue to do all of the above. We're now in probably 25 product areas, the vast majority of which we're gaining market share in and also growing in double digits. So it speaks to the power of the network. The network has kind of won in terms of the platform for the future for all IT and communications and we're try not to mess it up in that process, Susie.
GHARIB: All right, it seems like you're doing a pretty good job over there. Thank you so much, John.
CHAMBERS: My pleasure as always, Susie. Thank you for having me on your show.
GHARIB: My guest tonight, John Chambers, chairman and CEO of Cisco Systems.
