Cisco reports return to growth
Cisco Systems, the largest maker of networking equipment, reported a return to revenue growth and said that a second phase of economic recovery had begun.
Cisco beat Wall Street expectations with an 8 per cent year-on-year rise in sales to $9.8bn in the three months to January 23 following revenue falls during the past four quarters.
John Chambers, chief executive, said the results were outstanding and had exceeded Cisco's expectations.
"We believe they provide a clear indication that we are entering the second phase of the economic recovery," he said.
"During the quarter we saw dramatic across-the-board acceleration and sequential improvement in our business in almost all areas."
Cisco, with its routers and other networking equipment embedded in enterprises, is seen as a leading technology indicator of industry confidence. It also reports almost a month later than other technology companies.
It reported profits of $2.3bn or 40 cents a share. Analysts expected $9.4bn in revenues and profits of 35 cents a share, according to a Bloomberg survey.
On an analyst conference call, Mr Chambers said he was especially pleased with product order growth in the US - up 17 per cent year-on-year. Asia-Pacific orders were up by a double-digit percentage, Europe's were up in low single-digits and emerging markets were flat.
Cisco shares were up 3 per cent at $23.76 in extended trading in New York on the news. The shares are 50 per cent higher than a year ago.
Mr Chambers explained to analysts that the market hit bottom in its April quarter last year, while the July quarter was a tipping point and the beginning of an upturn in capital spending.The October quarter revealed an acceleration in spending and the first phase of the recovery, with the latest January quarter showing improvements across the board and the second phase of economic recovery.
His comments on recovery in all regions and market segments echoed those of Paul Otellini, chief executive of Intel, the world's biggest chipmaker, last month.
Mr Chambers said that only Japan had shown meaningful growth in the October quarter, but all five of Cisco's regions saw flat to double-digit order growth in the latest quarter.
Cisco has continued an acquisition strategy throughout the downturn as it has sought to expand into new markets.
It bought Tandberg, the video conferencing company, for $3bn last year and completed the acquisition of wireless equipment maker Starent for $2.9bn in its latest quarter.
Mr Chambers said Cisco's expenses would now grow at a faster pace as it continued aggressively to expand its business into 30 emerging technologies, such as video conferencing and smart power monitoring for utilities. He predicted that Cisco's workforce would grow by 2,000 to 3,000 during the next few quarters.
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