Cisco Systems CEO John Chambers sounded
both excited and cautious as he announced strong quarterly earnings for the
company May 12.
Several times during a lengthy conference call with analysts
and reporters, Chambers touted fiscal third-quarter results that included
revenue of $10.4 billion and net income of $2.2 billion—27 percent and 62.6
percent increases over the same period in 2009, when the global recession was
in full swing. He called the results "outstanding" and said they were
spread across the company's businesses and most regions.
Oftentimes those praises were followed by notes of caution,
with the CEO telling investors not to become
overly optimistic and to "wait for additional economic data" before
changing their investment plans.
Such is life during the recovery following the harshest
economic downturn since the Great Depression.
But Chambers said unless something unforeseen happens to derail
things Cisco is in a strong position to continue its solid growth. He said the
company is predicting revenue growth of 25 to 28 percent for the current
quarter, and hiring will continue for the next few quarters as Cisco adds 2,000
to 3,000 jobs.
While the company's core networking businesses continues to see
strong sales, he also pointed to the recently completed $3.4
billion acquisition of video conferencing company Tandberg and Cisco's burgeoning
data center partnership with storage giant EMC
and virtualization technology maker VMware as keys to the future.
The Tandberg deal—which was marked by initial resistance from
Tandberg shareholders and a lengthy review by European regulators—will
strengthen Cisco's video conferencing business.
Company officials have said they believe that with Tandberg in
the fold, revenue for Cisco's TelePresence business could grow to $1 billion or
more, and they have predicted that the worldwide market immersive video
collaboration space could grow from $3 billion in 2010 to $10 billion over the
next five to seven years.
Cisco also is moving its TelePresence systems into verticals such
as health care, education and retail.
Chambers also touted Cisco's growing data center business,
citing the partnership with EMC and VMware. Unified
Computing System, Cisco's converged data center offering, has close to 900
customers now and the company has won several big deals against large
competitors, he said.
He also cited the partnership's development
of VCE (Virtual Computing Environment), a joint venture to produce cloud
computing systems called vBlocks. The three companies also created a company,
called Acadia, to market the vBlocks.
Chambers said virtualization and cloud computing will be
important in data centers and the partnership with EMC
and VMware—of which EMC owns about 80
percent—will be a key player in the future.
Chambers' comments came the same week that EMC
is running its EMC World conference in Boston.
During the event, held May 10 to 13, a key theme was EMC's
push to help businesses in their migration
to private clouds, and EMC CEO
Joe Tucci several times mentioned the importance of the partnership with VMware
and Cisco.
Analysts were impressed by Cisco's quarter. In a report May 12,
Brian White, an analyst with Ticonderoga Securities, said Cisco is making the
right moves as the tech industry recovers.
"We continue to believe Cisco is in the midst of a major transformation
that is pushing the company into new markets, new product lines and lesser-penetrated
geographies, potentially allowing for an expanded addressable market and
attractive sales growth," White wrote. "We continue to believe that
Cisco offers investors one of the most attractive ways to play this tech
recovery and participate in new growth opportunities (e.g., virtualization,
cloud computing, consumer, video, collaboration)."
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