Cisco's Self-Defending Earnings

Published on February 4, 2009
by John Paczkowski

The global downturn has not been kind to tech bellwether Cisco Systems. Though the company reported second-quarter earnings and revenue that came in ahead of analyst estimates, it did so on a 27 percent year-over-year drop in net income.

Cisco’s networking products are crucial components of corporate infrastructure, but apparently not so crucial that its customers can’t forgo their equipment orders in a recession. Certainly, Cisco’s (CSCO) earnings–which include sales through Jan. 24–suggest that the global downturn continues to hamstring IT spending. How long that will last is anyone’s guess, although on a conference call with analysts CEO John Chambers said we may see things begin to turn around sooner than later. “The majority of our customers are guessing [the downturn will last until] 2010, while a smaller group sees the upturn toward the end of 2009,” Chambers said. “Given the coordinated activities of global central banks and the extremely large stimulus packages that are being implemented, I tend to be a little bit more optimistic than most of my customers. Time will tell if that optimism is appropriate.”

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