Cisco CEO Chambers Offers Cautious Optimism

 
 
By Jeffrey Burt  |  Posted 2009-11-04 Email Print this article Print
 
 
 
 
 
 
 

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.

Cisco Systems 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 Depression.

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 Starent Networks and the planned $3 billion acquisition of video conferencing company Tandberg.

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 solution.

On Nov. 2, Cisco continued its buying spree, grabbing the set-top box business of DVN Holdings, of Hong Kong, for $44.5 million.

 
 
 
 
 
 
 
 
 
 
 

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