Cisco sees recovery gaining steam

John Chambers, Cisco Systems (NASDAQ: CSCO - news) chief executive, on Wednesday said the economic recovery was picking up steam, giving him the

confidence to increase headcount and spending.

"We are starting to see solid indications of economic recovery in most geographies around the world," Mr Chambers said.

"We will set our strategy assuming an optimistic view on the economy."

While he acknowledged that not all sectors were coming back strongly, he said the increase in orders was prompting the technology stock bellwether to put "the gas pedal all the way down" in making investments for growth.

His comments came after the leading maker of networking equipment reported fiscal first-quarter results that beat projections, representing a sequential improvement from the fourth quarter.

Cisco's net income fell 19 per cent to $1.8bn, or 30 cents a share, as sales dropped 13 per cent to $9bn.

Cisco predicted that sales in the new quarter would increase by between 2 per cent and 5 per cent from the quarter ending on October 24, returning the company to year-on-year growth.

The company's shares rose 3 per cent in after hours trading to $23.93.

Cisco has helped some sales along with increased financing activity. Frank Calderoni, chief financial officer, told the Financial Times that the company had not changed its parameters for extending credit to customers but he said the offers were now being made in more places due to geographic expansion.

Cisco's most popular equipment is used to direct data on the internet and within companies, so the orders it receives can indicate the anticipated growth of a broader segment of the economy.

Mr Chambers said that not all his customers shared his optimism, suggesting they might not be planning to hire as rapidly as Cisco. "There are a lot of caveats around job creation and sustainability." He said the recovery was uneven, with public sector spending outpacing corporate purchases.

Citing uncertainty about the shape and strength of the recovery, Mr Chambers said that Cisco was only planning to ramp up its spending in the current quarter, deferring judgment on the following months until more evidence was available.

"We could see economic growth bounce up and down in the next 12 months," he said.

The company is pursuing multiple large acquisitions and its board on Thursday approved an additional $10bn in stock repurchase authority.

●Paul Jacobs, Qualcomm (NASDAQ: QCOM - news) chief executive, said the biggest maker of chips for mobile phones was "very bullish" on 3G market growth in 2010, predicting a 20 per cent increase.

Mr Jacobs announced full fiscal year revenues of $10.4bn, in line with guidance given at the start of the year.

Financial News