Cisco Issues 3-Year Forecasts, Sales Growth Seen in 5-7% Range

Cisco has sharpened its business strategy and is now focused on growing its earnings faster than revenue, said executives at the company's Annual Financial Analyst Conference in San Jose. The company foresees a 5-7% revenue growth for the next three years, due to public sector weakness, uncertain macroeconomic conditions and competition. Meanwhile, Cisco is targeting a 7-9% CAGR in earnings per share over the next three years.


Over the past 120 days, Cisco has reorganized its entire sales, engineering, services and operations teams. This involved the elimination of 12,700 full-time positions through lay-offs (4,400), early retirement (2,100), a factory sale in Mexico (5,000) and cuts of contracted workers (1,200). Realignments affected a further 23,000 other employees. These changes are expected to yield $1 billion in cost efficiencies.


Among the companies top 5 foundational priorities, there is a renewed focus on the Core by building momentum in Routing with the ASR 1000, ASR 5000, ASR 9000 and CRS platforms. The routing CAGR is forecast at 5-7%. In Switching, Cisco has seen pressure on gross margins but see opportunities in campus, data center and high-end enterprise networking. The switching CAGR is forecast at 2-4%. In Services, Cisco expects a stronger growth rate of 13-15% by offering its customized networking expertise and pursuing a collaborative partner approach.


In Collaboration, Cisco also sees 13-15% CAGR thanks to video, which it sees as its most important differentiator.


In Data Centers / Virtualization / Cloud, Cisco sees opportunities for borderless networks spanning enterprises and service providers. Major transitions are underway as storage, processing, networks and software are converging. The forecast is for CAGR of 2-4%, and possibly accelerating to 18%.


Cisco's Video Strategy relies on its "Medianet" architecture to deliver content to any device. Here Cisco forecasts growth of CAGR of 7-9%.


Architectures for Business Transformation aim to change the game for industry verticals. In the global commercial segment, Cisco sees CAGR of 9-11% over the next three years, for the global public sector the expected CAGR is 2-6%, and for global service providers the CAGR is 5-7%.


Presentations and an archived webcast from the day long event are posted in the Investor Relations section of the company's website. http://investor.cisco.com