Cisco looks to the future with investment plans

On Tuesday, Cisco reported profits for its fourth fiscal quarter 2008 were up 4.4 per cent to $2bn on revenue that climbed 9.9 per cent to $10.36bn. The results were in line with analyst expectations but were a far cry from the company's results during some of its best quarters.

There's no doubt the battered economy is affecting technology bellwether Cisco Systems but the company is looking to the future with plans for big investments across its portfolio in "adjacent markets".

Cisco's CEO John Chambers said he expects Cisco to continue to be affected by the downturn in the economy and he projected sales would grow by about eight per cent in the first fiscal quarter and by about 8.5 per cent in the second fiscal quarter.

He declined to give guidance for the second half of the fiscal year, because he said the economic outlook is likely to change in the next six months. Still, Chambers reaffirmed his long-term guidance for the company of growth between 12 per cent to 17 per cent per year.

Cisco is preparing to make heavy investments in new markets to prepare itself for when customers begin spending again.

This means the company will invest in new markets that are adjacent to existing product lines in all its major customer segments from the home network to the data centre, from small and medium businesses to the enterprise, and from its commercial businesses to the service provider market, Chambers said.

He said: "We'll partner big to big, and acquire big to small, or big to medium. So you could see us partner with an IBM or a Microsoft or an Intel. And we'll acquire more like a Scientific Atlanta or a WebEx. My favourite kind of company to acquire is one with 100 engineers who have a hot product they are just about to release."

Cisco has weathered several economic downturns in the past. And in the past when times have been tough, Cisco has ramped up investments in new markets to fuel growth for the future. So far the company has executed this strategy extremely well, spawning several new revenue streams that have gone on to become revenue generators. For example, Cisco's unified communications business and its IP telephony businesses were areas where Cisco invested during previous downturns. And today these businesses are paying off generating a significant amount of revenue.

This time around, Chambers says he already sees the next technological wave.

He said: "Web 2.0 and collaboration will be the biggest drivers for our business over the next five to 10 years."

Original article: Cisco invests in the future despite economic pressures from CNET News.com