Cisco to make Net phones in India

BANGALORE, India -- Cisco Systems Inc., the world's largest maker of computer-networking gear, will set up a trial factory in India to make Internet-based phones, expanding in a nation set to become its fastest-growing market.

The factory will be located in the southern Indian city of Chennai, chairman John Chambers told reporters in New Delhi yesterday. Cisco, which is based in San Jose, Calif., but is boosting research and development in India, named Wim Elfrink as its new chief globalization officer, saying he'll be based in Bangalore, a technology center.

Cisco's manufacturing plans in India will bolster the South Asian nation's aim of becoming a hub for telecommunications-equipment makers. India may attract as much as $11 billion in three years in its manufacturing sector, federal Communications Minister Dayanidhi Maran said in May. Maran has successfully wooed Nokia Oyj, Motorola Inc., and Samsung Electronics Co.

"There are huge emerging markets where the economy is strengthening and they're underpenetrated in terms of networking," said Jefferies & Co. analyst William Choi, who rates Cisco shares "buy," in an interview from New York. "The biggest part for Cisco is doing more R&D in India."

Cisco, which last year said it would invest $1.16 billion in India, will triple its workforce there in the next three to five years, Chambers said.

"India is a very important market for Cisco's global growth strategy," he said.

Shares of Cisco rose 5 cents to $27.09 in Nasdaq Stock Market composite trading. They have gained 58 percent this year to their highest since January 2004.

Chambers plans to tap growth in India and China as telephone and cable companies expand and upgrade their networks in the world's two fastest-growing major economies. Sales from the two will help Cisco's revenue growth in Asia accelerate in the year ending July, surpassing the 20 percent growth reported last year for the region, excluding Japan, the company has said.