In announcing Cisco Systems' solid quarterly earnings, Cisco CEO John Chambers says the economic recovery in the IT industry is picking up momentum. However, Chambers warns that it could be a slow recovery hindered by setbacks. Cisco generated $9 billion in revenue in the quarter, a 13 percent decline over 2008 but a better showing than analysts had expected.
CEO John Chambers Nov. 4
said he was increasingly optimistic that the IT industry and the global economy
as a whole were on the rebound after the worst economic crisis since the Great
Speaking with analysts and reporters while announcing the company's fiscal
2010 first-quarter results, Chambers said his company was seeing signs of
revival in both the consumer and enterprise spaces, and that most regions
worldwide were bouncing back.
"It appears things are moving in the right direction," he said.
However, Chambers preached caution to his employees, customers and
shareholders, saying there were no guarantees.
"No one knows for sure how strong [the recovery] will be, how long it
will take or how it will result in job opportunities," he said.
He did give a positive outlook for the next quarter-predicting revenue
growth of 1 to 4 percent over the same period in 2008-but added that Cisco
officials would wait until the next quarter was over before predicting the last
two quarters of their fiscal year.
Cisco's first-quarter numbers continued a trend among larger technology
vendors-including Intel, IBM and Google-of
quarterly numbers beating expectations. The networking giant saw revenues of $9
billion, a 13 percent decrease over 2008 but less than the 15 to 17 percent
decrease Cisco officials had expected.
Net income was $1.8 billion, a 19 percent drop from 2008.
Most of the company's businesses saw revenue declines from the same quarter
last year, though services were up 7 percent and the TelePresence business saw
a more than 100 percent increase in revenues.
Chambers said the company would begin targeted increases in expenses and
hiring, though it would do so cautiously.
The first quarter saw Cisco continue its aggressive streak of acquisitions,
in particular with the $2.9 billion purchase of wireless infrastructure company
and the planned $3 billion acquisition of video conferencing
Throughout the conference call, Chambers spoke confidently of Tandberg's
acquisition as a key part of Cisco's larger video strategy, despite mounting
opposition. Earlier in the day, investment firm OppenheimerFunds, speaking for
investors who own about 6 percent of Tandberg stock, said it would not sell at
the price offered by Cisco.
Other stockholders who hold about 24 percent of the stock said in October
they would not sell at that price, preferring that Tandberg either stay
independent or wait for a better offer from Cisco or a third party.
In a blog Nov. 2, Ned Hooper, Cisco's chief strategy officer, reiterated the
company's belief that the $3
billion offered by Cisco was a fair price,
particularly when weighing the
risks against the rewards.
Chambers said Cisco will continue to mix acquisitions with partnerships and
internal innovation as it looks to expand beyond its networking roots.
The earnings announcement came a day after Cisco
announced a partnership with EMC and VMware
to create the Virtual Computing
Environment, which will include systems called vBlocks that bring together
hardware and software from the three companies in a converged data center
On Nov. 2, Cisco continued its buying spree, grabbing the set-top box
business of DVN Holdings, of Hong Kong, for