Cisco sees Web 2.0 boom after posting strong final quarter

Cisco Systems expects Web 2.0 to drive a growth curve similar to the Internet expansion of the 1990s, accelerating the company's revenue growth, chairman and CEO John Chambers said as Cisco announced strong fourth-quarter numbers.

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Cisco Systems expects Web 2.0 to drive a growth curve similar to the Internet expansion of the 1990s, accelerating the company's revenue growth, chairman and CEO John Chambers said as Cisco announced strong fourth-quarter numbers.

Emerging technologies that allow collaboration, especially video, make this time like the early 1990s in terms of the networking company's prospects for growth, Chambers said on a conference call following the firm's earnings report.

Cisco raised its forecast for average revenue growth each quarter to between 12% and 17%. Cisco's standard prediction over the past three years had been for between 10% and 15% year-over-year growth in each quarter.

The brighter outlook flew in the face of recent stockmarket gyrations and worries over the US economy. But Cisco sees Web 2.0 driving demand for both network capacity, which its equipment provides, and tools such as hosted applications, which it is starting to sell.

The news was already good from Cisco's fiscal fourth quarter, which ended on 28 July. The company's revenue rose 18% from a year earlier to US$9.4bn (£4.64bn) while its earnings per share grew 24% to $0.31 (16p).

Not counting certain special items, Cisco earned $0.36 (19p) per share, one cent above the consensus forecast from analysts surveyed by Thomson Financial.

The growth was balanced across customer segments, product groups and regions of the world, Chambers said. However, the company's advanced technologies, including security, storage and unified communications, outshone traditional routing and switching revenue with a 24% increase. And emerging markets led Cisco's growth rate in orders, with the Middle East and Africa together showing a 50% increase from a year earlier. Overall order growth in the US was in the upper teens, led by service-provider investments, and enterprise network buying rebounded in the quarter, Cisco said.

Web 2.0 technologies, such as the web conferencing service Cisco acquired with its purchase of WebEx earlier this year, are the second wave of the Internet and could drive growth at Cisco for a decade, Chambers said.

"This truly is the top of the first inning of a nine-inning game," Chambers said.

Telepresence, the big-screen, high-definition videoconferencing system Cisco started selling last year, is the most striking of the technologies now and will eventually find its way from executive suites to homes, Chambers said. Cisco has about 50 customers for its telepresence systems today, but Chambers said response is like nothing he's seen before in his career.

"This is the first time I've seen this type of excitement," Chambers said.

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