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Cisco Media Roundtable – Financial Analyst Conference

September 6, 2007 - 0 Comments

I just got out of a media roundtable Q&A with Cisco Chairman and CEO John Chambers (JC), EVP and CFO Dennis Powell (DP), EVP and CDO Charlie Giancarlo (CG) and EVP and CGO Wim Elfrink (WE). We had a handful of media in the room and a handful of media on the phone. Media weren’t allowed to ask questions during the Financial Analyst Conference, so this was their opportunity to get that burning question answered by our top executives. Following is a rough synopsis of some of the questions and answers from the roundtable. I have attempted to capture the exact language in my notes, but I’m not a stenographer. Where I am confident it is a direct quote, I will place it in “quotes.”John Chambers kicked off the talk with a brief overview of the day. “Today was about collaboration. The network enables the power of the ‘we’ instead of the power of the ‘you.'” “We talked about market transitions and our focus on customer requirements…not competition.” Collaboration is “not about a product. It is about an architecture.” We have created technology “in a fashion that a CEO can operate easily.” We showed a brief video about our company meeting using TelePresence and connecting six company sites around the world. It is easy to see how “this changes everything.”Question: What network load increase do you expect from video?JC: We predicted “network loads would grow in 200 to 300% range” five to seven years ago. Our CRS-1 “was built not for phone calls but for video.” “CIOs are now seeing that 100% growth is probable and 200% is likely.” CG: “The network load has doubled every year for 40 years.” “With video, for 10 to 15 years it can continue growing.” “It is fairly common knowledge that internet will be the primary transport mechanism for video.” WE: “We cannot operate alone, we have to be totally collaborative. TelePresence is crucial for our existence in India.” “TelePresence was one of reasons for me and my family to move to India, I knew I could stay connected.”Question: What are you hearing about Microsoft’s UC launch in October?CG: I think their product will be effective in IM, presence and collaboration services. I think it will likely be 1.0 in real-time communications. Question: Other companies already had technology similar to Telepresence. Why did you enter that space?JC: “If you are the only one in a market, the market likely isn’t as exciting as you’d like it to be.”CG: “We’re identified as the leader in this space.” We have “minimal time and installation cost.” We have “ease of ownership.” “Where we have a multi-year lead, is in the technology itself. We have, without a doubt, lower latency and the best audio in the business.” It is also fully integrated with unified communication and is as “easy to use as dialing a telephone.” “A customer can do it on their own network or Service Provider network.” DP on TelePresence and collaboration: We have a finance off-site in San Jose each year, it is a “one way communiction with about 400 finance leaders in a day and a half.” This year, we changed it completely to TelePresence meetings with “129 directors in 19 global locations in 4 sessions.” In “1.5 hours, we got real-time feedback and rolled out the initiatives to the team.” “And, we saved $800,000.”Question: Are you providing additional guidance? Or, seeing any impact from in the enterprise from the subprime issue?JC: This is the “strongest global economy in my lifetime.” “We are seeing the majority of our customers say we are coming in for a soft landing.” “The fed and central bank’s will react appropriately should that be needed.” “Most business leaders and economists think the global economy is in pretty good shape.” “We don’t make decisions on a quarterly or yearly basis.”DP: “Sometimes people in U.S. forget that we’re in global economy.” And, “the global economy is strongest we’ve seen lately and it is increasingly detached from the U.S. economy.” “We are a U.S. company operating in a global ecoomy.”Question: What is your product pipeline looking like?JC: “Best pipeline I’ve seen in a while.” “We don’t see a limit of growth opportunities.” Our challenge is one of “prioritization” of where to invest.CG: “This year, we’ll spend between $4.5 and 5B on R&D across the scope of what we do.” “And, that doesn’t include acquistions. Tthat is a lot of money.” “What is unique about Cisco is the sheer number of completely new technologies and markets that we are entering at one time…and are profitiable.”Question: Are there new markets that you are going into that you haven’t told us about?CG: “Yes.” (Smile).Question: When might TelePresence be available at the consumer level?CG: “We just signed off on internal business plan on that.” “We should be able to produce a TelePresence system for home using the HDTV set that the consumer already owns providing a very similar experience that you see in the enterprise for about $1000.” “At some point, it may be integrated into the set-top box, but that won’t be first thing — much like the DVR with Tivo.”Question: Why isn’t our broadband in U.S. better? And where is the U.S. internationally?JC: “Emerging markets are out innovating us with broadband.” “We need a national broadband policy.” CG: The “biggest challenge we have is last mile.” “Last mile requires a lot of digging and pulling – which impacts a lot of local laws.” “There are a lot of hurdles and service providers face a lot of challenges when trying to roll out new infrastructure.”Question: So, when will I have better broadband at home?CG: “Ultimately, I think that it will be up to a city or state deciding that broadband is important as water or electricity.”Question: Do you like wi-max?CG: “We like wireless broadband, but for developed countries, broadband is really about fiber.” “For rural, wireless will be big…in the U.S. and globally.”Q: What challenges are you seeing in becoming a consumer facing company?JC: “Over time, we’re going to move to a cisco brand overall. it will take some time.”Question: Do you have a terabyte set-top box in yor future?JC: “Our view of the market is this: you don’t care where you information is stored…or where the content is. You just want access.” “There will be times that it might be in the data center or set-top box, that is why we are end to end and can accomodate whatever the preference of the user is.”CG: “I have no doubt that we’ll be getting to seveal terabytes in next few years.”Question: Linksys has been a challenge in terms of growth rates this past year. What are you doing there to remedy that?JC: Our consumer sales (Scientific Atlanta and Linksys) were “$3.5B for us last year.” T”hey grew about 20% in total.” “One of major decisions we face is “are we going to continue along our current path in consumer that gives us enough sustainable differentiation?”CG: The “bottom line is we think growth is going to pick up in linksys.” “We’ve had a restructuting there of late to scale beyond $1B revenue.”JC: The interesting point here is that “we will miss forecasts by products or countries, but it is the overall forecast that we are fairly good at.”Question: Does Muni Wi-Fi have a future?CG: “We have identified muni wif-i as risky.” “At the end of day, by going into that you become Service Provider…whether or not you charge for it ,you have customers.” “There obviously may be munis that decide to do it.” I think that major service providers will roll-out wirelss technology and it will be less relevant for munis.JC: My last comment is that there is “one thing that we have at cisco, we never fall in love with any technology.” “We listen to customers and go whatever way our customers tell us.”FORWARD LOOKING STATEMENT: “This presentation contains projections and other forward-looking statements regarding future events or the future financial performance of Cisco, including future operating results. These projections and statements are only predictions. Actual events or results may differ materially from those in the projections or other forward-looking statements. Please see Cisco’s filings with the SEC, including its most recent filings on Form 10-K and Form 10-Q for a discussion of important risk factors that could cause actual events or results to differ materially from those in the projections or other forward-looking statements.”

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