Cisco Systems (Nasdaq: CSCO) lowered its long-term sales forecast on Tuesday, acknowledging that its days of heady growth won’t return in the foreseeable future.
Chief Financial Officer Frank Calderoni told analysts and investors at a meeting in San Jose, Calif. that Cisco, the world’s largest maker of computer networking equipment, now expects sales to grow 5 percent to 7 percent per year for the next three years.
Its long-term target has been for annual revenue growth of 12 percent to 17 percent. That was easily achievable for a decade, as the Internet boomed. But its sales have grown by only 9 percent per year in the last four years, due to competition and the slow economy.
Analysts polled by FactSet have on average been expecting 5.5 percent sales growth for this year, so the midpoint of Cisco’s forecast is slightly higher. However, they were expecting slightly better growth in fiscal 2013 than Cisco’s forecast implies.
Cisco’s shares rose 26 cents, or 1.6 percent, to close Tuesday at $16.35.
Calderoni said Cisco expects to grow earnings faster than revenue, at about 7 percent to 9 percent per year.
Cisco also expects to “hold or gain share” in its major segments, Calderoni said. The 5 percent to 7 percent forecast for sales growth compares to the company’s 5 percent to 8 percent growth estimate for the total market for its products, implying that Cisco sees relatively stagnant market share expansion over all.
Cisco is in the midst of a drastic reorganization. The company has cut 6,500 jobs this year, and has gone from trying to expand into more than a dozen markets to focusing on five core areas. In the process, it has shut down its Flip Video unit, which made popular consumer camcorders, and trimmed its other consumer businesses.
Speculation is swirling that long-serving CEO John Chambers might be the next victim of Cisco’s shakeup.
“In terms of the board and the management team, we’re completely in sync,” Chambers said, according to Reuters. “They asked me personally would I be willing to commit to another three years.”
Chambers made verbal swipes at two main rivals in the market for routers and switches. Juniper Networks Inc. is the “most vulnerable I’ve ever seen them,” he said at the annual investor meeting for San Jose, California-based Cisco. Chambers said Cisco’s strategy is hurting Hewlett-Packard Co.
“I feel very good about where we are” in those two markets, Chambers said, despite pricing pressure from the likes of Huawei and Hewlett-Packard, according to The Financial Times.
“We have made all our changes,” he added.
Cisco’s toughest challenger, Chambers said, is Huawei Technologies Co. of China, which competes with low-cost equipment. Cisco plans to go after it in its home market, Chambers said.
Chambers is eliminating jobs and exiting businesses in a bid to revive sales growth and reverse the slide that knocked 20 percent off Cisco’s share price this year through yesterday.
In all, 12,700 people have departed Cisco as part of a cost- reduction effort, Chambers said today.
Cisco employs some 4,000 people at its campus in Research Triangle Park.
(The Associated Press and Bloomberg contributed to this report.)
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