Cisco: we're a growth machine

December 9, 2009: 11:52 AM ET

Cisco CEO John Chambers and strategy chief Ned Hooper address analysts. Photo: Jon Fortt.

Cisco has its swagger back.

When the networking provider hosted Wall Street analysts at its San Jose headquarters Tuesday for its annual update on the state of the business, the most striking thing was the full-scale return of confidence. After a year in which most of tech has struggled to regain its footing in a global financial crisis, CEO John Chambers and his lieutenants told the financial community that they're poised to grow sales faster than big companies typically can.

To be specific, Chambers says that in normal economic times Cisco (CSCO) can deliver annual sales growth of 12-17%. Off of his current revenue base of $36 billion, that translates into a promise to find more than $4.3 billion in new revenue this year alone.

Chambers believes he can do it because a fresh set of Internet technologies is changing the way we communicate – and giving Cisco a chance to grab a greater share of the spoils. Chambers has outlined three opportunities he believes will reap big rewards: video, collaboration and virtualization.

In the simplest terms, Cisco is betting that video will continue to grow its share of overall Internet traffic as carriers use the Internet video to deliver movies and TV, businesses use it to help employees share ideas and close sales more quickly, and consumers use it to express themselves on the go.

All of that new video traffic should create demand for Cisco's highly profitable networking gear. It should also create new openings for someone to sell communication systems, back-end servers and management software to run it – and Chambers is positioning Cisco to make that sale.

Skeptics point out that Cisco has stronger competition than ever. Hewlett-Packard (HPQ) and IBM (IBM) sell their own packages of virtualization technology. Microsoft (MSFT) and IBM have their own collaboration suites. Each has resources to rival Cisco's – and it would be foolish to count any of them out.

So can Chambers deliver? More than a few analysts think he can. They point to Cisco's cash hoard that's approaching $40 billion, its track record for successful acquisitions, and its knack for spotting trends early enough to get a jump on rivals. He'll probably need to use all those tools – and some new ones – to meet his own lofty growth targets.

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