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Annual revenue run rate for Cisco TelePresence is $200 million

December 15, 2009 | Chris Payatagool
cisco-financial-analyst-conference-1.jpgCuriously, John Chambers said seconds before that TelePresence had annual revenue of only $75 million.

By Brad Reese

During this month's Cisco Financial Analyst Conference, Chairman and CEO John Chambers finally revealed the annual revenue run rate of Cisco's highly touted and much ballyhooed - TelePresence technology.

Up until last week, it had been very tough for me to estimate actual TelePresence revenue dollars. For example, during Chambers' discussions over past Cisco earnings calls, it was clearly impossible for me to get an idea as to the actual revenue dollar amount success of TelePresence:

Cisco F1Q07 (Qtr End 10/28/06) Earnings Call Transcript:

"I think telepresence should be $1 billion market in three to five years. Remember we have never had $1 billion market in less than five. So telepresence will probably be three to four quarters out before we know if it's as hot a product and more importantly as productive a product as I think it will be."

Cisco F4Q07 (Qtr End 7/28/07) Earnings Call Transcript:

"In Q3, TelePresence systems orders grew from the prior quarter by over 300%. In Q4, the number of TelePresence systems grew by over 400% from Q3. We now have TelePresence orders from approximately 50 customers."

Cisco F2Q08 (Qtr End 01/26/08) Earnings Call Transcript:

"Think of the possibilities if companies begin to implement 1,000 plus TelePresence units."

Cisco F3Q08 (Qtr End 4/26/08) Earnings Call Transcript:

"TelePresence orders grew over 1000% granted of a relatively small base."

Cisco F4Q08 (Qtr End 7/26/08) Earnings Call Transcript:

"TelePresence grew approximately 500% year-over-year. Just use TelePresence as an example. What Martin and team have been spending in TelePresence for a two year development cycle and then the best we've ever had a billion dollar product come to market is five years later in a new market area. They are very likely to beat that with all the appropriate caveats in terms of the run rate. And using TelePresence as an example it's at a run rate of 500% year-over-year growth. So while it's not a sure thing and obviously I expect very good execution and there's always a portfolio play here, the one product I feel with the highest probability of hitting that $1 billion run rate in a new area that we haven't been before is probably TelePresence."

cisco-financial-analyst-conference-3.jpg

Cisco F2Q09 (Qtr End 01/24/09) Earnings Call Transcript:

"The number of customers that ordered, for example, TelePresence systems is now 312 in total and grew by 65 new accounts in Q2. TelePresence, as an example, will become material a year from now in terms of volumes."

cisco-financial-analyst-conference-4.jpg

Cisco F3Q09 (Qtr End 03/31/09) Earnings Call Transcript:

"All of us understand the benefits from telepresence which had another outstanding quarter growing over 70% year-over-year in terms of orders and over 130% in terms of revenues year-over-year with 45 new customers in Q3 and approximately 400 new system orders. We now have half a dozen customers with 50+ telepresence systems deployed and a total well over 300 customers in our total customer base. For the first time, we are now seeing some customers talk about hundreds of telepresence systems. Telepresence as we said earlier was up 138%."

Cisco F4Q09 (Qtr End 7/25/09) Earnings Call Transcript:

"TelePresence revenues were up to 97%."

Cisco F1Q10 (Qtr End 10/24/09) Earnings Call Transcript:

"We remain very pleased with the growth of the [tele-presence] year over year. To give you some additional color on our progress in this area, we talked earlier about tele-presence revenues once again growing in excess of 100% year over year. In Q1, we conducted 77,000 Cisco internal meetings, had another record quarter in terms of units old, selling over 570 systems and adding approximately 85 new customers. We just recently celebrated our three-year anniversary since launching tele-presence. Other product areas that may be of interest to you from a revenue perspective including tele-presence had increases over 100% and we added approximately 85 new customers in Q1. We view tele-presence at the high-end to be extremely effective for Cisco and make no mistake about it, we have caught the imagination of both enterprise leaders and service provider leaders on what this can mean.

Q&A with John Chambers and Frank Calderoni:

What amazed me about the above Q&A webcast, was the "red flad raised at the 1 hour, 28 minute time mark," that's when John Chambers bragged TelePresence had over 500 customers and specifically said last year's Cisco TelePresence annual revenue run rate was only $75 million, seconds later, Chambers then asked for input from Cisco SVP Marthin De Beer, who said that the combined annual product and service revenue run rate for TelePresence was just north of $200 million, having grown almost 100% over the last year.

In my opinion, that's very curious because I've confirmed with RBC Capital Market analyst - Mark Sue (who personally attended and asked a question during the Q&A) that from a base of over $100 million, Cisco TelePresence enjoyed 100% YoY growth!

Is it possible that Chambers may have been quoting product revenue and that service revenue might represent $125 million of Marthin De Beer's $200 million in total annual TelePresence revenue?

Finally, since Chambers also simultaneously stated that Cisco often doesn't initially recognize TelePresence revenue during large customer roll-outs, is it possible that TelePresence is mostly a pure service revenue play?

[via Network World]








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