UPDATE: Cisco CEO Sees Tech Services Driving Steady Growth

Date : 12/07/2012 @ 12:00PM
Source : Dow Jones News
Stock : Cisco Systems, Inc. (MM) (CSCO)
Quote : 34.25  0.5 (1.48%) @ 8:00PM
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UPDATE: Cisco CEO Sees Tech Services Driving Steady Growth

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--Cisco CEO gives confident view of margins

--CFO affirms long-term earnings growth target

--To start "Tomorrow Starts Here" marketing campaign

(Adds comments from CFO in paragraph four and from CEO in paragraph seven.)

   By Drew FitzGerald 

Cisco Systems Inc. (CSCO) should continue to deliver steady revenue growth by expanding its identity from a maker of network equipment to a diversified provider of information technology, Chief Executive John Chambers said Friday.

The long-time Cisco chief also dismissed criticism of the company's traditionally high-margin business of selling routers and switches, which some analysts warn could slump as competitive pressures hurt their selling prices.

"We think we're going to hold our gross margins relatively steady over the next three years," Mr. Chambers told analysts and reporters gathered in New York for the company's annual forward-looking discussion.

Chief Financial Officer Frank Calderoni affirmed the company's long-term adjusted earnings growth target of 7% to 9%, with adjusted gross margins in the high 20% range. The San Jose, Calif., company also reiterated last year's revenue prediction, which called for a compound average growth rate between 5% and 7%, largely driven by expanding its business in fields such as collaboration software and IT services.

Cisco plans to kick off a new marketing campaign Monday to tout that shift, using the slogan "Tomorrow Starts Here" to highlight the company's younger businesses. Its added business lines include NDS Group, a provider of television set-top boxes that the company acquired this year, and likely Wi-Fi management company Meraki, which Cisco offered $1.2 billion to buy.

"The middle of everything we talk about is intelligent networks," Mr. Chambers said.

He provided the battle between retailer Wal-Mart Stores Inc. (WMT), a big Cisco customer, and Amazon.com Inc. (AMZN) for online consumers as an example, offering an opportunity for the networking and software company to benefit from an increasingly complex competitive environment.

Cisco shares were recently up a penny at $19.49 Friday.

Write to Drew FitzGerald at andrew.fitzgerald@dowjones.com

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