Cisco Declares Recovery

Cisco Systems Inc. (Nasdaq: CSCO), which was arguably the first tech company to predict the economic collapse of late 2008, is ready to say everything's better.

All indications are that "the the recovery, from a capital expenses standpoint, is very strong" and is moving into a second phase of growth, Chambers said on this afternoon's earnings call.

Analysts had expected a sunny earnings report from Cisco, and the company obliged today. For its second quarter, which ended Jan. 27, Cisco reported earnings per share of 40 cents on revenues of $9.8 billion, topping analyst expectations of 35 cents and $9.4 billion, as measured by Thomson.

Cisco's revenues for its second quarter, which ended Jan. 27, were $9.8 billion, topping the $9.4 billion anticipated by analysts, according to Thomson.

Moreover, Cisco says revenues in its third quarter, which ends in April, will be between $10 billion and $10.2 billion, outpacing the $9.8 billion prediction from analysts.

This means Cisco is going to start spending again, Chambers said: "You will now start to see us grow our expenses at a faster rate." Cisco expects to hire 2,000 to 3,000 more people during the "next several quarters," targeting the hires for particularly promising areas of business. At the recent CES and other events, Chambers has been saying business is climbing back upward after a disastrous 2009. At the same time, he's been pointing out that Cisco was early in predicting a weakened economy, back in February 2008. (See Cisco Sounds Warning Bells.)

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 4:43:33 PM
re: Cisco Declares Recovery

The summary for this article says "hiring is coming back" but that's only for Cisco (and in numbers that match the recent layoffs that Cisco considered very minor, come to think of it).  Chambers made at least two references to the possibility of a jobless recovery for the economy in general.

Also on the less optimistic side, Cisco is still not giving guidance beyond 1 quarter, because it's still unclear how "sustainable" the growth is.  (Chambers's gut feel is that it's sustainable.)  Basically they're being chicken.

I like the (pre-written!) caveat Chambers had:  "It is important to remember that we could be wrong."

Prizm 12/5/2012 | 4:43:28 PM
re: Cisco Declares Recovery

Did Chambers say where the hiring will take place?  My guess is China and India.

Pete Baldwin 12/5/2012 | 4:43:24 PM
re: Cisco Declares Recovery

Nick Lippis (@NickLippis on Twitter) points out that Cisco is "the only Dow stock up today" ... 

Pete Baldwin 12/5/2012 | 4:43:24 PM
re: Cisco Declares Recovery

He did not, and he warned that the hires would be very targeted.  My first impression would be that this means they'll mostly be in Eos-like adjacencies.

Hanover_Fist 12/5/2012 | 4:43:24 PM
re: Cisco Declares Recovery

Now that Cisco's turned the economic corner, maybe they can start shipping products again?

We can't get Cisco product!

Cisco's not being honest with the world - they keep talking solving their"material product shortages" problem but don't believe it!

They need to come clean - if they've declared victory against the depression, then why can't they ship gear without a 6-month delivery date?

lcw 12/5/2012 | 4:43:22 PM
re: Cisco Declares Recovery

Agreed. Something's rotten in San Jose when mainstream products are showing a 4+ month lead time.

From what I heard, their recession-response inventory reduction and manufacturing slowdown went very well. But then they also changed suppliers for some key component and have had a really tough time ramping up manufacturing again. Voila, their customers are now in backlog hell.

Juniper and Brocade ought to spin Cisco's woes into some sort of promotion.


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