CEOs in Technology

Cisco CEO John Chambers, who has turned into something of an economic oracle probably because he is more in command of his catbird seat than most big-time CEOs, said Wednesday when Cisco reported its quarterly results that the economy hit a “clear tipping point” before mid-summer and is now accelerating worldwide, enough for Cisco itself to start cautiously spending again. He’s planning targeted hiring.

For the three months ending October 24, Cisco came in with earnings down 19% year-over-year at $1.79 billion, or 30 cents a share, on revenue from everywhere down 13% to $9 billion. Product sales were off 17% at $7.2 billion. Service revenue was up 7.4% at $1.7 billion. Other companies have exhibited a similar pattern.

Wall Street expected 31 cents on $8.75 billion so Cisco did better than even it thought.

The company is forecasting revenues this quarter will be up 1%-4% year-over-year or 2%-5% sequentially, which suggests $9.18 billion-$9.45 billion, with a gross margin of 64%-65%.

Normally Cisco’s second fiscal quarter is 3% better than its Q1.

Cisco’s guidance, better than the $9 billion consensus, is indicative of its belief that sequential growth will “meet or exceed expectations during normal economic times.”

Chambers wasn’t willing to speculate on trends past late January, when visibility will be better, on the chance the rally isn’t self-sustaining. The rate of recovery and job creation is unclear and things may be ragged the next 12 months, exacerbated by political moves.

Chambers indicated that he knows not everybody is seeing the same thing or putting the pedal to the metal and that he could be sticking his neck out.

He said the US was particularly strong in the October quarter – actually flat year-over-year compared to down 20% for the three quarters running before then and so an “inflection point” – and that spending by large multinationals was actually up 10%.

Asia-Pacific and even parts of Europe did well. Pricing in emerging markets is “brutal.”

Chambers claimed Cisco was having solid results with its venture into servers but begged for more time to comment.

The company, which just spent $6 billion on acquisitions, intends to “aggressively invest in new and adjacent markets.”