VoIP, Video Drive Chambers to Raise Cisco's Revenue Expectations

Pointing to the growth of video, VoIP, collaboration and other Web 2.0 technologies, Chambers said he expects network loads to continue to increase, driving sales of Cisco equipment for the next decade.

"We believe this 'phase two' of the Internet will result in dramatic innovation and productivity increases, enabled by collaboration and Web 2.0 technologies such as unified communications and TelePresence," Chambers said during a conference call to discuss Cisco's fourth-quarter financial results. "This market transition has the opportunity to be an instant replay of what occurred for Cisco in the very early '90s and powered Cisco's growth and the growth of the industry for the next decade that followed."

Cisco raised its long-term revenue growth expectations to 12 percent to 17 percent year over year, up from its current guidance for growth in the 10 percent to 15 percent range.

Financial analysts have long been goading the company to boost its forecasts, Chambers said.

In particular, Chambers pointed to video as a major driver for network upgrades.

"Video continues to drive network demand and is potentially the killer application for loading and bringing value to the network," Chambers said. "From an enterprise and commercial perspective, we expect that video applications such as TelePresence and unified communications will continue to load networks and require upgrades to existing networks."

Using Cisco itself as what he called an aggressive example, Chambers predicted that the vendor's own network loads will grow at least 200 percent to 300 percent per year over the next several years as the San Jose, Calif.-based company continues to roll out unified communications, high-definition videoconferencing and other video applications.

For example, the company has deployed 110 of its TelePresence conferencing systems worldwide, conducting over 17,000 meetings using the high-definition video technology throughout the first half of this year, Chambers said.

It's a model he expects many of Cisco's customers to follow.

"CEOs not only grasp the effectiveness [TelePresence brings] from a time and travel cost-savings perspective but almost uniformly they understand the value of the business transformation to the organization. This is the first time in my career that I've seen this type of excitement and interest from CEOs for a technology," he said.

Cisco's fourth-quarter results were buoyed by strength in sales across nearly all of its major product lines, Chambers said, noting that 17 of the company's top 20 product families hit year-over-year growth rates for the quarter of 15 percent or better.

For the quarter, ended July 28, Cisco reported earnings of $1.93 billion, or 31 cents per share, up more than 25 percent from $1.54 billion, or 25 cents per share, for the same quarter a year ago.

Revenue for the quarter climbed 18 percent to $9.43 billion, up from $7.98 billion in the year-ago quarter.

Excluding charges, Cisco earned 36 cents per share, beating Wall Street expectations by a penny. Analysts expected the company to report earnings of 35 cents per share on revenue of $9.29 billion, according to Thomson Financial/First Call.

For fiscal 2007, Cisco reported profits of $7.33 billion, or $1.17 per share, up from $5.58 billion, or 89 cents per share, in fiscal 2006. Revenue for the year hit $34.92 billion, up from $28.48 billion in 2006.

Cisco expects year-over-year revenue growth of 13 percent to 16 percent for fiscal 2008. For its 2008 first quarter, the company expects to report revenue of $9.45 billion to $9.55 billion, representing growth of about 16 percent compared to its 2007 first quarter.

Chambers also disclosed the planned retirement of Cisco Senior Vice President and CFO Dennis Powell after the second quarter of Cisco's fiscal 2008, which ends in January. Frank Calderoni, Cisco's senior vice president of finance, will succeed Powell, who turns 60 in December.