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Cisco sees 5 percent to 7 percent revenue growth

The company told financial analysts it is cutting costs in a bid to grow profit faster than sales

Cisco expects annual revenue growth between 5 percent and 7 percent over the next three years and expects its still-ongoing restructuring to help the company increase profit faster than revenue, executives said on Tuesday at a financial analyst conference.

The restructuring taking place over the past several months has seen 12,900 jobs eliminated through a range of steps, including outsourcing, and shifted 22,700 employees in total, Chairman and CEO John Chambers said in a keynote address at the company's headquarters in San Jose, California.

The company is sharpening its focus on a few key markets and streamlining its sales process in a bid to cut its operating costs, Chambers said. That effort will continue for the next few years, he said. It kicked off earlier this year after Cisco posted disappointing financial results.

"We were fat," Chambers said. "I mean, we had an extra four or five inches around the waistline."

Earnings per share, excluding selected one-time items, should grow between 7 percent and 9 percent per year over the next three years, said Chief Financial Officer Frank Calderone.

As part of its streamlining effort, Cisco has jettisoned a controversial structure built around councils and boards, making specific leaders responsible for product areas, Chambers said. For example, the company's core routing and switching businesses each has been assigned to a pair of leaders, and longtime executive Marthin De Beer has sole responsibility for video.

Cisco's cuts, designed to slash about US$1 billion from annual operating expenses, are about right but might have to be revisited if the economy takes another dip, said analyst Mark Sue of RBC Capital Partners. The company's revenue forecast is more realistic than what it has given in the past, he said. Sue also praised the reorganization.

"Ownership is very important, and it's a company that got very cumbersome to do business with," Sue said.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is [email protected]


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