Cisco is expected to take a bold step this week and tell the financial community it can return to its historical targets of 12-18% growth, owing in part to the economic recovery and in part to Cisco’s radical moves to increase its total addressable market (TAM).
We don’t doubt that expanding TAM will help a lot, but we’re not sure whether Cisco’s going to be able to get much contribution from the recovery. Our surveys still show buyers are likely to hold back on spending in the first half of 2010, and that over time, there will be considerable pricing pressure on Cisco from competition in the data center market.
All this suggests that Cisco will have to continue to bank on TAM growth, and eventually that means M&A and management diversion. We are particularly interested in what Cisco decides to do in the service layer, where competitors Juniper and Alcatel-Lucent have already launched strategies.