When I sat down with Cisco CEO John Chambers at the Consumer Electronics Show in Las Vegas last month, he had a powerful story to tell: A plan to transform Cisco in a vertical, enterprise and consumer powerhouse 7 years in the making, was ready to pay dividends in 2010.
Chambers is normally an optimistic guy, but this was different.
This was not merely a feel-good look-ahead to the possibilities, but a vision toward the concrete opportunities upon which Cisco would seize this year. Not eventually, or down the road, or over the horizon, but now.
And that's saying something.
Hardly hunkering down and hibernating during the economic downturn, Cisco spent its way through it. Kinda like a NASCAR driver coming up on a major wreck going into turn 4 and accelerating through the smoke. Cisco spent billions last year alone on the likes of Starent and Tandberg and Pure Digital. It embarked on a blade server plan which puts it directly against Hewlett-Packard , once a key customer, and IBM . The pitched battle among these three titans, as enterprise spending stages a big recovery this year, could end up being one of the top business stories of the year.
Analysts are looking for 35 cents a share on about $9.4 billion in revenue. The key metrics to watch, per Street Account, include overall product revenue of $7.52 billion; routers, $1.63 billion; switches, $3 billion; advanced technologies, $2.4 billion. The company's services revenue should be just shy of $1.9 billion, and non-GAAP gross margins should approach 65 percent.
Chambers enjoys a kind of Alan Greenspan or Ben Bernanke following when it comes to the company's conference call guidance language. Estimates suggest that the company's third quarter will essentially be flat, with analysts expecting $9.5 billion in revenue, but the language to look for is a "return to seasonal growth patterns" which would bode well for top line improvement as the year progresses.
Cisco continues to sit on a massive war chest of around $30 billion in cash and the Street is expecting the company to continue its torrid acquisition strategy. Chambers told me last month that Cisco would continue to look for buy-out opportunities. I asked him directly, as Cisco continues to take on HP and IBM in servers, whether Dellwould make sense as a target. He gave me a very direct answer: No. Same goes with Palm , by the way, with Cisco happy as the back-end network provider and having little interest in selling a smart phone of its own. I don't know, but it seems to me Palm could be an interesting business for Cisco, especially if the company used the platform to show off network capabilities -- the possibilities -- in much the same way Google plans to showcase the possibilities from its Nexus One.
I have written before: Cisco seems to be in the catbird's seat, and with a heavy emphasis on operational excellence, ala Sam Palmisano at IBM and Mark Hurd at HP, it seems these guys are shaping up as the Mt. Rushmore of enterprise opportunities for investors.
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