N+I: Executives cautious about spending, says Cisco

NEWS

Cisco Systems chief executive John Chambers may have said it best in his opening remarks: "What a difference a year makes." Fresh off a quarterly earnings report Tuesday that gave some hope that the tech downturn may be bottoming out, Chambers seemed humbled by Cisco's travails this past year but happy with 2 percent year-over-year revenue growth -- which would have been a laughable pittance during the go-go late 1990's telecommunications boom. Sobering losses this past year have hit Cisco and the industry hard. But Chambers accentuated the positive during a speech on Wednesday at the Networld+Interop networking industry conference here, focusing on the productivity gains associated with using Internet technology and sounding cautiously optimistic about a rebound. "In high-tech, it was not a recession, it was a depression," Chambers said. "There are, for the first time, some very positive signals." Cisco's shares jumped on Wednesday after the company's better-than-expected earnings and Chambers comments during the quarterly earnings call that there was some improvement in technology spending. Chambers echoed those sentiments on Wednesday, saying Cisco was watching for indications from the manufacturing industry to better understand where the economy and tech market is going before calling a resurgence in technology spending. Chambers has said that encouraging signs are emanating from customers in the federal government, retail banking and retail as a whole. Chambers called the current technology climate a "show me" economy, saying chief executives are cautious about spending until they can grow their own revenues and profits. Striking familiar themes, Chambers also said Cisco was positioning itself through the downturn to be in even better shape once the tech climate improves. He cited company analysis that found that while Cisco grew 2 percent year-over-year, there was a combined 43 percent decline in sales for its chief competitors, such as Nortel Networks, Lucent Technologies and Juniper Networks. What will drive new growth? Chambers is convinced the overall productivity gains a company can reap from using Internet technologies will make new investments in networks and computers a no-brainer. He predicted companies can reap 5 percent to 10 percent productivity gains annually using technology and the Internet, with Cisco's optimistic -- or some may say stretched -- goal for itself being 15 percent gains. In a question and answer session following Chambers speech, he said it would likely be the United States that spurs the world economy out of recession. "The good news and the challenging news is that the global leaders realise that if there's going to be a recovery, it's going to be started by the US," he said.

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