One on One with Cisco Chairman and CEO John Chambers
Tuesday, May 06, 2008
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SUSIE GHARIB: Joining us now, Cisco Chairman and CEO John Chambers. Hi, John nice to see you.
JOHN CHAMBERS, PRESIDENT & CEO, CISCO SYSTEMS: Susie, it's a pleasure to be with you again.
GHARIB: You said today that you expect the current quarter 9 to 10 percent revenue growth. What's going to drive that growth?
CHAMBERS: I think it's very similar to what drove our growth the last quarter. We had very good balance from a geographic point of view around the world. The strongest areas were actually Asian Pacific and Japan and Latin America. The areas where there's a little bit of challenge were the U.S. But in terms of our product leadership, the pipeline looks very good. Networks have moved from being plumbing to how you do solutions if you're a business leader or how you bring your entertainment into your home if you're the service provider or the consumer. Nice way of saying Susie, we're moving from just being a transport type of business to solutions for businesses and going to be (INAUDIBLE) entertainment into your home in the future.
GHARIB: You just mentioned that a lot of your order growth has in the past quarter was coming from overseas, less in the United States. Do you expect that trend to continue throughout 2008?
CHAMBERS: Not necessarily for the whole year. We said back in early February I think on your show Susie, that we expected the next couple quarters in the U.S. to probably be bumpy and that they would be a little bit challenging from an economic point of view. Unfortunately that's turned out to be pretty accurate. Most of my customers are saying that it turning up toward the end of the year and most of my enterprising service provider customers are saying Cisco we're getting closer to you and you're going to get a larger share of our spend. So I feel pretty good about the fact that we can control our influence.
GHARIB: Tell us a little bit more about how the slowing U.S. economy is impacting Cisco with all the belt tightening that's going on. What impact does that have on your business?
CHAMBERS: I think in the short term, orders tend to be a little bit harder to get in. They tend to slide out at one quarter to the next, but in the long term, most of our customers can only delay spending for so long. So actually the companies who led us into this slowdown, the financial companies, the manufacturing which we showed up in the slowness of orders two or three quarters ago, actually accelerated this quarter and grew in the mid teens. So it feels like a normal economic cycle. I think the Fed's doing the right thing. And I think most of my customers view that we'll come out of it toward the end of the year and Cisco will get our share of spending in the process. The key takeaway Susie is, if you can grow at 10 percent when the economy is tough, think what you can do when the economies are good and that's why we're so comfortable with that 12 to 17 percent growth going forward.
GHARIB: When you say going forward, that 12 to 17 percent revenue growth when do you see that kicking in? Is that going to happen in 2008 or is that going to be pushed into the new year?
CHAMBERS: I think you're going to look at that over the next three to five years to be what our average revenue growth will be.
GHARIB: All right. You said on the analyst call today that you expect a growth burst over the next few years. You compared it to the kind of growth that Cisco experienced back in the 1990s. Give us a little bit more color and characterization on what you mean by that growth burst.
CHAMBERS: Sure I think there are probably three factors driving it, Susie. The first is the role of the network is changing. It's changing from just being a highway to literally the key enabler of all forms of communications and IT, that on that highway, you're going to have a lot more load personal (ph) from video. And so networks loads won't grow at 50 or 100 percent a year like everybody said two to three years ago, but more like what we predicted at 200 to 300 percent would be the norm and 300 to 500 percent would be possible. That means you sell a lot more Cisco gear to make that happen.
GHARIB: Wow.
CHAMBERS: Right behind that will be the next wave of productivity. It will be built around collaboration, what our kids invented on social networking and the capability to use any device to get to any content. So that sharing in terms of productivity will drive the third wave of loads on the networks.
GHARIB: All right. Sounds like an interesting time for your company. Thank you so much, John.
CHAMBERS: Susie, as always, it's a pleasure.
GHARIB: My guest tonight John Chambers, chairman and CEO of Cisco Systems.
