Cisco’s Chambers predicts online video surge

John Chambers, chief executive of Cisco Systems, the world’s biggest maker of internet networking equipment, on Tuesday said that strong demand for online video could lead internet network traffic to grow by as much as 500 per cent per year over the next several years.

Because of its high bandwidth requirements, video is widely viewed as the “killer application” of integrated data, voice and video services. In recent years, Cisco has launched an aggressive bid to position itself as a key supplier of the equipment and services to such networks.

In a keynote speech at Cisco’s worldwide analyst conference in Silicon Valley, Mr Chambers reaffirmed the company’s commitment to a long-term growth rate of 10-15 per cent.

But he said experimentation with new technologies would be essential to meet growth targets.

“In order to hit 10-15 per cent growth, you’ve got to put more balls up in the air,” he said.

Cisco on Tuesday announced its latest experiment – a push into application networking services, which help streamline performance and reduce infrastructure costs as networks become more complex.

As with its eight previously announced advanced technologies, Cisco believes its move into application networking services has the potential to generate at least $1bn in new revenues over the next five to seven years.

Mr Chambers said it was unlikely that all of Cisco’s technology initiatives would succeed. “We should have some failures,” he said. “If we don’t have enough failures that means I’m not taking enough risks.”

The company expects growthof between 10 and 12 per cent in 2006.

Cisco last month named digital video as its seventh advanced technology after it struck a $6.9bn deal to buy Scientific-Atlanta, the world’s second-biggest maker of set-top cable television boxes.

The company has launched three advanced technologies this year in a bid to capitalise on growing demand for network services.

“In the future there are literally going to be billions of devices attached or networked to the internet in some way,” said Charlie Giancarlo, Cisco’s chief development officer.

“As many devices as there are people in the world, perhaps even more.”

Shares in Cisco rose 0.3 per cent on Tuesday to $17.56. The shares have fallen from a July high of just over $20 a share.