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Cisco's Chambers Expects US Growth to Pick Up

Andrew Fisher
Wednesday, 7 May 2008 | 11:06 AM ET

Despite economic weakness in the U.S., Cisco Systems Chairman and Chief Executive John Chambers said Wednesday he expects his company's global reach will help it to grow at a double-digit rate.

Cisco Systems
Paul Sakuma
Cisco Systems

"I think the global strength of the economies will help pull the U.S.," Chambers told CNBC. He said the company is targeting between 12 percent and 17 percent growth "over the foreseeable future."

As the largest maker of telecommunications equipment, Cisco is seen as a bellwether for the technology sector.

According to Chambers, the business climate is a little more predictable now than it was when the company last reported quarterly earnings three months ago. He expects to see some relief from the U.S. economic slowdown later this year.

"I've talked to all the leaders around the world - both economic and business leaders - most of them say the most likely scenario is coming out by the end of the year," Chamber said. "We're all just kind of taking action assuming that."

"We see this as a couple-of-quarters phenomenon. Whether it's two or three, no one knows," he told CNBC. "Toward the end of the calendar year, the most likely scenario, according to our customers, is: we'll be in an uptick at that time."

Cisco Beats the Street
Earnings results and a company outlook, with John Chambers, Cisco chairman/CEO and CNBC's Mark Haines

Late Tuesday, the maker of computer networking equipment reportedbetter-than-expected quarterly results, but some analysts expressed concern that revenue was slowing across many of its geographical regions and product lines.

Excluding one-time items, earnings rose to 38 cents a share on revenue of $9.8 billion in its fiscal third quarter, from 34 cents a share on sales of $8.89 billion last year.

On average, analysts surveyed by Thomson Financial estimated earnings of 36 cents a share and sales at $9.75 billion. Analysts' estimates typically exclude one-time items.

"Thirty eight cents is a couple of pennies better than I was looking for and revenue was very slightly better than I was looking for," said Signal Hill Group Analyst Erik Suppiger. "My sense is they're probably seeing some level of stabilization versus incremental slowing in the past quarters, but it's really preliminary to be making that call."

Cisco shares initially rose on the better-than-expected profits, but then pared the gains as concerns about revenue growth spread.

Chambers told CNBC the company's strongest markets remain India and China.

"Our business in China grew way over 30 percent, year-over-year, this last quarter," he said. "India, after a tremendous quarter in Q2, grew 16 percent again in Q3."

With the strength Cisco is seeing in these markets, the company continues to hire workers and invest in its IT business.

"We're hiring at about a 7 to 9 percent pace per year, and...we're investing heavily in IT at the same time," he told CNBC. "We wouldn't be doing that if we felt this slowdown was going to last for a prolonged period of time."

Reuters and AP contributed to this article.

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