Cisco Sees Big, Bold Growth
The forecast came out of Cisco's analyst conference yesterday and was tucked neatly into a whole program of long-term philosophizing. Among other things, CEO John Chambers outlined plans to have Cisco teach customers how to alter business practices to take advantage of technology. The strategy would shift Cisco from being a vendor to being more of a consultant, coach, and life guide for enterprises (see Cisco Rolls Out Roadmaps).
But one analyst wonders if Cisco had a short-term motivation in its long-term preaching. Timm Bechter of Legg Mason Inc. notes that Cisco's stock has been a laggard – down 19 percent from its Dec. 31 closing of $24.23, while the Nasdaq composite has been up 6 percent since then, and Juniper stock has risen 56 percent.
It's particularly frustrating because Cisco has turned in a good year. "A year ago I was a doubter; I was projecting only 5.5 percent growth for them," Bechter says. "But then I had to adjust it upward to 11 percent, and they ended up growing 18 percent – and their stock went down!"
Bechter wonders if Cisco hauled out the ambitious long-term forecast as a "damn the torpedoes" strategy. With investors reacting tepidly to everything else, maybe Cisco executives decided to play their best cards now.
"They have talked before about near-term plans, and the response has not been good. So now, I think they are just talking about the future," Bechter says. "Where last year they were talking about updates and traffic, this year they are taking a long look three to five years down the road."
Did it work? Not yet – Cisco's stock actually fell 23 cents (1.1%) to $19.73 yesterday. It had rebounded to $19.86 by midday today.
Overall, analysts liked Cisco's numbers, and some had recorded similar forecasts already. Steve Kamman of CIBC World Markets expects Cisco's revenues to enjoy a 13 percent compound annual growth rate "out to 2009," according to a report issued this morning.
"These are very strong, aggressive growth targets," Kamman wrote. He added that "Cisco generally under-promises and over-delivers, implying further upside to these forecasts."
— Craig Matsumoto, Senior Editor, and Mark Sullivan, Reporter, Light Reading
For the latest intelligence and analysis of next-generation telecom market opportunities, check out the coming Light Reading Live! event: Light Reading's Telecom Investment Conference, at the exclusive Plaza Hotel in New York City, on Wednesday, December 15, 2004.