Cisco Shares Rise Before ‘Significant’ Announcement (Update1)

(Adds sales growth goals in eighth paragraph.)

By Rochelle Garner

March 8 (Bloomberg) -- Cisco Systems Inc. shares rose to their highest level in more than a year the day before the network-equipment maker promised to make a “significant” product announcement.

Cisco, the biggest maker of networking gear, rose 92 cents to $26.13 at 4 p.m. New York time on the Nasdaq Stock Market, the biggest jump in five months. The shares are trading at their highest level since June 2008.

“Cisco will make a significant announcement that will forever change the Internet and its impact on consumers, businesses and government,” the company said in an invitation to analysts and media last month.

The company hasn’t provided more details. Ittai Kidron, an analyst with Oppenheimer & Co. in New York, expects Cisco to unveil a router capable of transmitting Internet traffic at 120 gigabits per second per slot, or more than 2 terabytes per device. That kind of high-speed equipment would appeal to phone carriers and Internet-service providers.

Trading in bullish Cisco options also increased, jumping to a two-year high today. Almost 237,000 calls changed hands, 6.4 times the average during the past four weeks and the most since February 2008.

Google Project

The Cisco event comes after Google Inc. announced plans to build an experimental broadband service that will offer Internet speeds 100 times faster than current networks. Google, the world’s most popular search engine, is developing the network to show the potential of high-speed Internet service.

Investors view Cisco as a technology-industry bellwether because it dominates the market for routers and switches, which direct the flow of network traffic. In general, large businesses buy switches for their corporate networks. Phone carriers and Internet-service providers, which account for about 35 percent of Cisco’s revenue, mostly purchase routers.

Global data traffic will probably more than double every year through 2013, fueled largely by video, according to Cisco. Chief Executive Officer John Chambers has set a long-term goal of 12 percent to 17 percent for annual sales growth. The company plans to enter 30 new markets to reach that target.

Chambers has called video “the killer app” because it needs more bandwidth than voice and data, thus spurring demand for networking gear. Last year, Cisco acquired Pure Digital Technologies Inc., the maker of the Flip Video palm-size camcorders. With Flip, users can upload videos directly to Web sites, increasing network demand.

Consumer Videoconferencing

In July, San Jose, California-based Cisco said it’s working with phone and cable carriers to create products that let consumers hold videoconferences through their televisions. Those products would also let home users exchange messages and leave videos for friends to view on their televisions.

Cisco said in January that it will begin testing a home system that lets consumers hold high-definition video chats using their existing TVs and Internet connections. The trials, conducted with Verizon Communications Inc., were scheduled to start early this year.

--With assistance from Brian Womack in San Francisco. Editors: Jerry Byrd, Nick Turner

To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net

To contact the editor responsible for this story: Jonathan Thaw at jthaw@bloomberg.net

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