Cisco declared war of Juniper and Huawei

Cisco stated that within the next three years the annual income of the company will grow on average from 5% to 7%. Earlier it gave higher forecast: growth up to 12-17%. Nevertheless, during this period profit will increase by 7-9%. Having faced severe conditions of the market and trying to increase profit, Cisco started reduction of the expenses.

Analysts said that they expected reduction of digits of income especially as improvements in world economy do not go as quickly as it was predicted by many. Colin Gillis, the expert of BGC Partners, noted that actions of Cisco did not become a surprise, and at the company everything is not as bad as could be. On Tuesday, reacting to statements of the management of Cisco, stocks of the company on Wall Street rose 1.6%.

Cisco dominated in the market of computer networks and within more than ten years held two-digit revenue growth. However over time the competition more and more accrued from such companies as Juniper Networks and the Chinese Huawei Technologies. In April the chief executive of Cisco John Chambers announced need of "drastic measures" for carrying out reorganization of the company which is the world's largest producer of network equipment.

Having made the decision - to focus on the core business, the company reduced nearly 13 thousand jobs, sold the plant in Mexico and contracted business on production of consumer Flip Video video cameras.

According to the analyst of Sterne Agee company Shaw Wu, the measures taken by Cisco install optimism. "It seems, efforts on upgrade of the company and simplification of its structure bear fruit and will allow it to work better, at least, in the short term", - he said.

In general, the community of analysts welcomed that speed with which Chambers carried out restructuring of the enterprise - approximately in 120 days.

Also the unambiguous digit arranges the company which once showed permanent two-digit revenue growth. Analysts cheered up, looking at the seeming confidence of the company in its capability to resist to aggressive price policy of competitors.

The forecast of Cisco for 2012 in volume of a gross profit - from 60% to 62% looks a little better, than it was expected as a number of investors were afraid that this digit will fall lower than 60%. The company spoke of the ​​ the forecast as about "conservative".

A few years ago competitors forced Cisco to reduce prices for products that negatively affected a margin and led to gradual reduction of a market share of the company. Analysts are afraid that for opposition of the competition of Cisco it is necessary to lower a margin again.

This Tuesday Chambers declared war to all competitors: from Juniper Networks which, according to him, is most vulnerable, to the Chinese Huawei. At an annual meeting of analysts he swore to fight against Huawei on the home ground and gave to this company definition of very tough competitor.

At this meeting Gary Moore, the chief operating officer of Cisco company, selected 10 areas in which the company makes reductions or leaves business and 11 where reduces or postpones investments. He noted that the company will be reoriented on seven key aspects: security, mobile Internet, servers and access to them, network virtualization, management of the cloud systems, software and television presence. Moore also announced plans of reduction of time necessary for the statement of the new directions in economic policy of the company.