Article from Forbes:

Investors have soured on Cisco Systems after the company said costs would rise. But buried in the company’s third-quarter financial results are some numbers that could benefit a wide swath of the telecom sector.

Cisco’s (nasdaq: CSCO) unit that targets the market for phone calls placed on Internet lines has shot up dramatically, CEO John Chambers said Tuesday afternoon. Chambers said the company’s enterprise-communications group, which specializes in the voice-over-Internet Protocol market, saw sales increase by 40% over the last year. While that’s good news for Cisco, the unit’s results may be even better news for some of its VoIP-focused competitors, which are all vying to gobble up enterprise IP-phone lines–a market the Dell’Oro Group projects will grow from $1.6 billion in 2005 to $4.2 billion in 2010.

In a research note issued on Wednesday, UBS analyst Long Jiang said Cisco’s IP-phone growth indicates "continued robust IP adoption by enterprises" and commented that the trend is good news for the rest of the industry as well. Jiang added in an interview that legacy business-phone vendor Avaya (nyse: AV), which controls about 20% of the market, could see "impressive" growth.

Jiang also said that Avaya, which competes with companies like Nortel Networks (nyse: NT), Siemens (nyse: SI) and Alcatel (nyse: ALA), needs to overcome issues specific to the company, including a supply-chain problem. But he noted in his report that new additions to Avaya’s product line, including messaging systems, could be "potential positive catalysts." Avaya’s shares have recently traded down 5% from their 52-week high, reached Monday.