Newsmaker: Cisco CTO: We're still hot

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going in the future. We've indicated that application-level networking is definitely an area in which we're going to go.

People keep asking what that means, and we say it includes things such as XML and other message-passing technologies. In general, we believe that there is a good opportunity for us to get more involved in application-oriented networking. And that's about as far as we've gone so far. But that's not a long-term view; that's a short-term view. We'll definitely have more to say on this later in the year.

Combined, Cisco's six Advanced Technologies now make up 19 percent of the company's revenue, up from 16 percent. When, if ever, do you think these products will overtake Cisco's main Ethernet switch and IP router business?

Once you hit a billion-dollar run rate and you're able to maintain the growth, it really starts to have a big effect on Cisco's top line. We've got a number of Advanced Technologies that are either just above or just about to reach that billion-dollar run rate. And if we're able to continue the growth as we've been doing all along in these Advanced Technologies, we think that's really going to start making a very big difference to Cisco's overall top-line growth rate.

On the last quarterly conference call, CEO John Chambers said storage area networking had grown 70 percent from the previous year. That's more than any of the other five Advanced Technologies. Why do you think storage came in so strong?
What these results show is that any new technology, no matter how strong and how stable, takes time for customers to fully test and deploy. It also takes some time to develop in the marketplace.

I'd say it takes about a year for customers to learn about new products, test them and understand them.

We came out about two years ago with our storage networking products, and these products were easily a generation or more ahead of our competition. They provided a lot of new value and added function. Today, they are rock-solid from a stability, security and reliability standpoint. And we are starting to really hit our stride.

I'd say it takes about a year for customers to learn about new products, test them and understand them. Now these things are really starting to take off. We're seeing growth in that market today because our products are superior and we've developed good partnership relationships with the major storage companies.

We're also seeing very strong growth in home networking and IP telephony. Security is a more mature market that we're seeing very good growth in.

Cisco recently announced its acquisition of Airespace, which has a different architecture for building wireless local-area networks than Cisco. Once the deal is finalized, how will these products fit into Cisco's portfolio?
Airespace has a different architecture in some aspects, but we think that it's very complimentary. As you may recall, when we first entered into the switching market, we made four strategic acquisitions, each one bringing to Cisco a set of capabilities and experiences, which provided leadership in a different segment of the switching market.

We believe that we are doing the same thing in the wireless space. We entered the wireless space with our acquisition of Aironet back in 1999, and that has allowed us to go from $0 to more than a $700 million run rate in that business. We believe that the Airspace acquisition positions us very favorably in a new segment of the wireless market.

What are Cisco's plans for getting into the carrier telephony or wireless market?
We have shipped about 470,000 voice over IP ports in the fourth calendar quarter of 2004. That's a lot of ports by anyone's measurement. And it's been growing extremely rapidly. So that's on the consumer side.

We are also participating in the service provider market. For example, Vonage is a good customer of both our gateways and our soft-switch technology. We're working with all of the major cable companies in the states, too. And we're working with many different competitive voice carriers, both in the United States and internationally. We're quite bullish on what we phrase as voice over broadband, or the use of IP to deliver voice to homes over a broadband connection such as DSL or cable.

What about on the wireless side? For example, what are you doing to offer Wi-Fi gear for public hot spots? Companies like Tropos Networks have already been doing this.
On the wireless side, we are absolutely the access point of choice for wireless hot spots. Nearly all wireless hot spots use Cisco Aironet access points because of the product's superiority in range and performance. We also offer a number of features and capabilities specific to hot spots that we've integrated into that product.

So when all these different cities talk about rolling out their own hot spots, will Cisco be one of the biggest equipment suppliers?
Yes, absolutely. Hot spots in general tend not to be a huge part of our marketplace, simply because the market could never be as large as what it is in the enterprise or consumer markets. But we think it is a very important strategic market. And it certainly helps us to develop the technology to be as good as it can possibly be, so it's an important one from that standpoint.  

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