China looms large on Cisco's horizon


John Chambers says China will soon be Cisco's second biggest market

BEIJING, China (CNN) -- John Chambers, the head of Internet technology giant Cisco Systems, says China will shortly emerge as the company's second biggest market.

Chambers predicts sales in China of $1 billion by the end of the year so long as China's economy maintains a strong rate of growth in the midst of a U.S. economic slowdown.

He says efforts made by China's political and business leaders over the past 15 years to modernize the country's technology infrastructure are beginning to show on the company's bottom line.

From five years ago, when China accounted for less than 0.5 percent of Cisco's revenues, Chambers says the growth of the Internet should see the market jump to second behind the United States within a few years.

"I've been coming to China for 15 years. It would not surprise me if it was our second largest in terms of volumes after the U.S., looking out several years," Chambers told CNN's Asia Business Morning (ABM) from Beijing.

$1 billion annual revenues

Later, he told wire journalists: "We anticipate hitting a billion dollar run-rate by the end of our fiscal year."

That would lift China above the U.K. as the second largest market for Cisco, accounting for about 10 percent of the company's global revenues.

In the first quarter of 2001, Chambers said Cisco had been buying components from Chinese suppliers at an annualized rate of $800 million.

"Both government leadership and business leadership have done an amazing job, they get it (the Internet), they're well positioned and China is going to be a major force in the global economy," Chambers said.

India growing fast

Meanwhile, Chambers predicts the Indian Internet infrastructure market could be worth about $500 million a year to Cisco within five years, up from a fraction of that at present.

"India is currently 0.33 percent of our business, and it would not surprise me if in five years it got up to be more like 5 percent of our business," he told ABM anchor Andrew Stevens.

Cisco said on Wednesday it would lift its annual research and development spending in India from $150 million to $200 million.

"Cisco's investment will go towards expanding the Cisco Global Development Center in Bangalore, which currently employs over 400 engineers," said a company statement. The money will also go to promoting five development centers in Bangalore and Madras.

Reuters contributed to this report.

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