Cisco posts stronger than expected results

Cisco posted stronger-than-expected quarterly results and said it expected the weak economic environment to be relatively short term.

Investors took heart from chief executive John Chambers' comment that he had "very strong" confidence in Cisco's long- term revenue growth target of 12 per cent to 17 per cent.

"Despite concerns of deterioration in its core market, Cisco reiterated its long term growth guidance, giving jittery investors some comfort," said Mark Sue, an analyst at RBC Capital Markets.

Cisco, which sells routers and switches that direct web traffic, has benefited as global phone companies and large corporations upgrade their networks to meet growing Internet use, but investors have been worried that a weaker economy could weigh on technology spending.

Its profit for the fiscal fourth quarter to 26 July rose to $2 billion (£1 billion), from $1.9 billion (£950 million) in the year-ago quarter.

Quarterly revenue rose 9.9 per cent to $10.4 billion (£5.2 billion). Analysts on average had expected revenue of $10.3 billion (£5.15 billion).

While the veteran technology executive avoided giving a full-year outlook for the fiscal year that just began, only giving an outlook for the first two quarters which were slightly below estimates, analysts said they were happy with what they got.

Chambers also said he saw mixed signals in the economy, stock market and energy costs, but that the challenges would be relatively short term.

"While it is very difficult to predict when we may see a stronger spending environment by our customers and return to our 12 per cent to 17 per cent long-term growth objectives, our best estimate... is that the current economic challenges remain with us for the next few quarters," he said.

Chambers spooked the market last month when he told Reuters that more customers saw an economic recovery early next year rather than this year and similar comments elicited little reaction on Tuesday.

Analysts said they also were encouraged by Chambers' remarks that its US enterprise business was showing improvement.

Chambers said Cisco will always be affected by economic changes, but that it will manage to grow in the long term, regardless.

"During each economic slowdown, Cisco has always navigated through them very effectively gained wallet share and in my opinion market share," he said.

Analysts have also said Cisco was relatively resistant to economic downturns because it has broadened its customer base, as well as its product line and geographic reach.

While it is best known for selling routers and switches, it has expanded into software and new technologies such as video conferencing.

It said on Tuesday that orders from emerging markets excluding Asia grew around 10 per cent in the July quarter, whereas orders in the US and Canada grew seven per cent. European orders grew 11 per cent.

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