Cisco Financial Forecast Raises Economic, IT Spending Worries - Page 2

In addition, the forecast from Chambers and other Cisco officials should be viewed as caution for what lies ahead, they said.

€œThe spending environments remain very tepid with regards to Enterprise IT spending, Public Sector, and of course, Europe,€ the analysts wrote. €œWe note that Cisco€™s comments are driven not just by Q3 orders, but more significantly, by their sales pipeline analysis, which is even more forward-looking.€

Chambers said what enterprises are doing is looking for certainty in very uncertain times, and to some extent, that is impacting their spending. Customers are telling Cisco that they expect to spend more on IT in the second half of the year than the first, but that events globally will impact their eventual decisions.

€œ[T]he tangible proof [of more second-half spending] is the customer saying it, but you need to know that if the situation in Europe begins to get really hard or the global environment gets softer or some of these governments€”whether it's in India or Argentina or the U.S. or in the five or six major leading countries in Europe€”don€™t resolve some of the issues, then I think people are in this uncertain environment and when they're uncertain, unfortunately, you don't spend,€ Chambers said.

Despite the global economic situation, analysts said operationally, Cisco is doing well. Scott Dennehy, an analyst with Technology Business Research (TBR), in a May 9 research note pointed out the company€™s strengths in its next-generation efforts, in such areas as wireless, video, data center and service, though its routing and collaboration businesses saw flat revenue. The relatively flat networking numbers echoed what rivals like Juniper Networks have seen in terms of spending by service providers, enterprises and governments, Dennehy said.

€œHowever, Cisco€™s brand position, its ability to provide end-to-end solutions, as well as its laser-sharp focus on its key markets (e.g., routing/switching, cloud, video, etc.) will continue to drive the company€™s revenue growth and profitability forward and insulate it from major shifts in customer-spending patterns,€ he wrote.