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TheStreet Open House

Cisco to 'Bring Sex' to Marketing Campaign (Update2)

(Story updated with additional comments from John Chambers on Cisco's acquisition strategy, as well as the company's closing price.)

NEW YORK ( TheStreet) -- Network-equipment maker Cisco (CSCO) is rolling out a global marketing push next week that may surprise some people.

"You will see us launch on Monday a different positioning for Cisco," CEO John Chambers said during a keynote presentation at the company's financial analyst event in New York on Friday.

The campaign will focus on TV and digital ads, and involve "augmented reality," according to the CEO, who said it will "bring sex" to the company's marketing efforts, much to the audience's amusement. "Sex, in terms of excitement," he quickly qualified, laughing.

Cisco recently delivered robust fiscal first-quarter results, dodging the economic woes that have hurt tech heavyweights such as IBM (IBM) and Intel (INTC). The San Jose, Calif.-based firm also offered bullish guidance, boosted by a push into recurring revenue areas such as software and services.

Software, in particular, was a big theme during the analyst meeting. "Software today is about $6 billion in standalone revenue," Chambers said during his presentation. "We want to double that over the next three to five years."

The CEO, however, said Cisco will also use software as the launch pad to sell its core networking products. "We will absolutely embrace software, but it will be software with ASICs and hardware," he added. "We will support any device -- it doesn't matter if it's Apple (AAPL), Microsoft (MSFT) or RIM (RIMM)."

Chambers returned repeatedly to cloud computing during his keynote, saying Cisco products are deployed within most private clouds.

"Out of our last 10 acquisitions, nine out of the 10 either did cloud and/or software -- you can see where we're going," he said.

Recent Cisco acquisitions include a $1.2 billion deal for privately held cloud networking specialist Meraki and its $125 million purchase of management specialist Cloupia.

Chambers, during a question-and-answer session with analysts, said Cisco will be opening its wallet for significant, but not too sizable, acquisitions.

"We have gone too long without any major M&A," he said, pointing to its $2.9 billion acquisition of Starent and $3.4 billion deal for Tandberg, which took place in 2009 and 2010, respectively.

The Cisco chief said that, while Cisco has made smaller, strategic acquisitions, the hiatus from bigger deals has shaved about 1% off the company's revenue.

"You will see us more active," he said. "I am not saying that we will buy someone for $20 billion."

Chambers clarified his comments during a separate question and answer session with journalists, defining a large acquisition as one "in the $5 billion to $7 billion" range.

"We just really don't believe in large acquisitions," he said, adding that the $1.2 billion Meraki deal was "ideal" for Cisco.

During his presentation, the Cisco chief reiterated a prediction of 5% to 7% revenue growth during the next few years, and said gross margins are expected to remain "pretty steady."

Cisco's gross margin was 62.7% during its recent fiscal first quarter and its operating margin was 27.95%.

Speaking during the event, Cisco CFO Frank Calderoni forecast that the company's operating margin will be in the "high 20s" in fiscal 2013, up from his prior expectation of "mid-20s." Cisco's operating margin in fiscal 2012 was 28%.

Cisco shares closed down 0.74% at $19.33 during Friday trading.

-- Written by James Rogers in New York.

>To submit a news tip, send an email to: tips@thestreet.com.

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