Cisco Chief Cautiously Optimistic

Cisco yesterday offered a cautiously optimistic prediction that the US would be leading the rest of the world out of the economic downturn before the end of this year, despite releasing earnings figures that suggested that the collapse in sales in the technology sector was still continuing.

John Chambers, chief executive of the US maker of communications equipment, which has become one of the bellwethers of the technology industry, offered the more upbeat comments though he continued to warn that any recovery will be slow to take hold.

"It feels a pretty fair amount better compared to just a quarter ago," the Cisco chief executive said.

"It has to level out before it can get better . . . [and] my customers are saying it's levelling out." He added, however, that it would "take a couple of quarters" for the recovery to develop once the bottom had been reached.

Mr Chambers' comments echo the more optimistic views of some other tech CEOs recently, including Intel's Paul Otellini, who have also claimed that the downturn is starting to bottom out. The change in mood has underpinned a strong recovery in technology stocks in recent weeks, including a 30 per cent bounce in Cisco's shares from their low point.

There was little evidence in the results released by Cisco yesterday, however, to point to any immediate stabilisation in demand for its routers, switches and other products. Since the company's quarter, to the end of April, closes a month later than most other tech companies, its figures are often looked to as the most up-to-date state of demand for technology at large.

Cisco said revenues for the quarter had dropped by 17 per cent to $8.2bn, though its earnings beat expectations as it reined in costs. Orders taken during the period - an indicator of future sales - were also down sharply, falling by 22 per cent in the US and 28 per cent in Europe.

Despite that, Mr Chambers said that he believed Cisco would now be able to get through the downturn without having to resort to any company-wide job or salary cuts, a more positive stance than the view he issued earlier this year.

The Cisco CEO also said that the company's recent foray into the server business would weaken the company's links with some other tech companies through which it has sold a significant volume of products in the past. "HP is clearly going to be a competitor, that happens," he said, though he added that Cisco did not anticipate major disruption amid the shifting alliances.

Cisco said its earnings dropped to 23 cents a share from 29 cents the year before, ahead of expectations due to cost cutting.