The Cisco (CSCO) Kid Will Stay The Course

John Chambers of Cisco (CSCO) says he will not change his plans for the company even if there is a significant recession. His view of the world goes out five years or more. Cisco is doing the right things and is not going to be distracted by the economy. At least not for now.

The comments by Chambers are refreshing and, hopefully, he can stick to them. He will not manage his company quarter to quarter. The long term prize is too good.

Cisco would still seem to be in one of tech’s few big sweet spots. Chambers told Reuters "We think 12 to 17 percent growth is very doable if our vision, our differentiation strategy and execution is right. That’s pretty strong for a company that’s $40 billion in sales."

In a broadband world, the business of selling routers and video delivery technology should be very good for a number of years to come.

Cisco does face a headwind in a global recession. It is not hard to see large telecommunications and cable companies pushing back capital spending for a few quarters or even a couple of years to keep their financial results in line with Wall St. expectations. Cisco’s set-top box business has a lot of competition now from companies like Amazon (AAPL) and Apple (AAPL) who want a device on top of the TV. Cisco’s big video conferencing business faces less expensive products based on IP delivery. Microsoft (MSFT) has a big business in this part of the industry.

Chambers is making a promise. Long-term thinking brings the best results. If the economy gets bad enough, it may be a hard pledge to keep.

Douglas A. McIntyre