Cisco outlines strategy and tries to reassure analysts

On a day when Cisco Systems Inc.’s stock hit a 52-week low of US$45 in trading, company president and CEO John Chambers delivered a message to an audience of 500 financial and industry analysts that Cisco is on track as the networking powerhouse moves into 2001.

In his presentation Monday, Chambers reassured analysts that there was no change in guidance, which in Wall Street speak means that Cisco’s revenue and earnings forecasts are on target.

Chambers said he wasn’t all that concerned about Cisco’s stock price, which was down $37 from its high of $82 earlier in the year. In fact, negative perceptions fostered by a sagging Nasdaq are just the kind of environment conducive to Cisco’s advancement of market share, Chambers said.

Jeremy Duke, an analyst at Synergy Research Group Inc. in Phoenix, said, “The market is seriously disconnected with what’s going on [at Cisco].”

Cisco’s strategy, Chambers explained, is to look for points of “inflection, disruption or transition” either in markets or technology where it can “break away” from the pack. One of those inflection points, Chambers said, is the move from separate networks for data and voice to a single network based on Internet protocols. As this concept takes hold among service providers, voice services for all practical purposes will be free, and telephone companies will make their money from transporting data. Other niche companies will benefit by offering value-added services, such as unified messaging, made possible through applications that run over an IP network, Chambers said.

Whether the network is in the enterprise or provided to a business by a service provider is becoming irrelevant, Chambers said. Large companies will blend services and transports from their own enterprise with from application service providers, Web-hosting companies and telecommunications companies to create seamless intelligent networks, Chambers said.

Duke added, “Cisco is well balanced geographically and across product types.” But he noted that Cisco still has work to do in the service-provider market, where companies like Nortel Networks Corp. and Lucent Technologies Inc. still rule.

Soon, Chambers noted, large corporate users won’t be concerned about where the enterprise ends and the service provider begins. Even now, Chambers said, “many users really don’t care where the network is located. They simply want it to work, to be secure, reliable and available.”

Cisco shares were up to $50.50 per share at 3 p.m. Tuesday.

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