Chambers: Cisco's Ready to Brawl
Chambers, speaking at an investment conference, said Cisco stands to gain more market share during tough times than during boom times. He sees Cisco’s product balance, its geographic balance, and its relationship with its large enterprise customer base as the keys to its ongoing stability.
But it wasn't all cheery chatter. Chambers was at times feisty, vowing that Cisco would compete more aggressively on the market performance of its high-end routers, where Juniper Networks Inc. (Nasdaq: JNPR) and Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7) are currently besting it (see AT&T Deal Boosts Avici).
“We have got to compete on feeds and speeds,” Chambers said. “You will see us be more direct with regard to understanding and challenging our competitors’ claims. Some of the claims aren’t nearly as effective as some people would anticipate them to be.
“Juniper’s a very good company, and they’re fun to compete against.” Chambers added, though, that Cisco would be more aggressive about comparing Juniper’s marketing claims to results. “We’re going to be the clear leaders in high-end routing."
Chambers also wondered why other network equipment companies — such as Lucent Technologies Inc. (NYSE: LU) and Nortel Networks Corp. (NYSE/Toronto: NT) — aren't making headway in the high-end routing space.
In optical networking, Chambers said he would be “very disappointed” if Cisco didn’t hit his goal of $3 billion to $7 billion in revenue by the end of 2001.
Chambers told investors to watch deals in which Cisco sells end-to-end optical portfolios, for an indicator of its optical success. However, he added an important caveat: “You want to watch which ones we win that are profitable,” he says. “We are not going into situations where there is too low a margin with too high a risk.”
Chambers reiterated that, although Cisco’s vendor financing deals have been conservative when compared to its competitors, it would be even more conservative in that area in the coming months, focusing on profitability. But he maintained that, even with a lower stock price, Cisco is still on track to acquire 20 or more firms this year.
Also, Chambers dismissed claims that a slowing economy would cause staffing concerns for Cisco. On the contrary, he said, economic transitions make it easier to retain staff and make acquisitions. “Will Cisco be affected by a slowdown in carrier spending? Absolutely. We are not immune, but we won’t be as affected as certain segments of the IT community."
He also noted that, as a rapidly growing company, Cisco is bound to have a set amount of turnover within its management ranks. “I will either lose or change 10 percent of my leadership team every year. We anticipate that coming: It's just a natural phenomenon."
Chambers told investors to expect Wall Street earnings estimates on Cisco to vary more widely than before (see CIBC Downgrades Cisco, Juniper). “If we can say what the capital spending will be and what the economy will do in the short term, than we can predict the quarters very accurately. Lately, though, our visibility has been a bit tougher, and therefore I would expect a wider range of estimates."
All in all, Chambers won the crowd with his candor and his sunny disposition.
Apparently, however, the speech was not sunny enough to reassure Cisco's nervous investors. Cisco's stock rose briefly leading up to Chambers's speech, but slid back afterwards. In late afternoon trading, Cisco was down 2.69 (7.24%) to 34.44.
-- Phil Harvey, senior editor, Light Reading http://www.lightreading.com