Cisco Sees Tipping Point And Revs Engines For Growth

August 5, 2009

Cisco Systems may have disappointed Wall Street with its fourth-quarter results.

But the network giant says its recently completed fourth quarter may have been the “tipping point,” where sales declines from the global downturn began reversing themselves and growth resumed.

We are now moving the entire focus of the company to growth, says Ciscos John Chambers

"We are now moving the entire focus of the company to growth," says Cisco's John Chambers

As a result, “we are now moving the entire focus of the company to growth,” says CEO John Chambers. It is possible a couple of quarters from now “we will look back and see that the tipping point was the fourth quarter.”

At first, the growth may be hard to see. The company projected first quarter sales would decline 15 to 17 percent from a year ago. But they will be up 1 to 3 percent from the fourth quarter, compared with the typical 1 to 2 percent rise expected from a fourth to a first quarter.

This is an “aggressive, bold statement,” Chambers said on a conference call with analysts. “Overall, this is business as normal.”

While a second quarter of positive quarter-to-quarter growth would be a welcome sign for the company (the fourth quarter also had quarter-to-quarter growth, the company’s first quarter in a year) it is not guaranteed. Cisco’s key router and switch businesses continued to decline in the fourth quarter, with router sales were off 27 percent and switch revenue slumping 20 percent.

But it reflects what Chambers said were improving business trends in the United States, Asia Pacific and in emerging markets. Only Europe appears to be lagging.

Cisco hopes to take advantage of the improving market place by investing in approximately 30 new business opportunities. These include what Cisco calls its smart connected communities (marketed to overseas governments) and its smart grid technologies for improving energy efficiency.

“It is too soon to call a recovery,” Chambers says. But the fourth quarter saw the first positive economic signals.

That means it is time for the aggressive equipment supplier to rev its engines.

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Posted by Mark Boslet

Economic Downturn Worsened In January, Cisco Says

February 4, 2009

The economic malaise that spread from U.S. to the rest of the world continued to worsen in January, Cisco Systems said Wednesday. And there is no end in sight.

Network equipment maker Cisco reported its fiscal second-quarter results on Wednesday with a relatively benign sales decline of 7.5 percent. However, orders for new gear worsened through January and the deteriorating pace of business is likely to continue in the third quarter.

One of the most difficult times in my career, says John Chambers

One of the most difficult times in my career, says John Chambers

Monthly orders were down 9 percent in November, 11 percent in December and a more severe 20 percent in January, the Silicon Valley company said.

“It continues to be one of the most difficult times in my career” when it comes to forecasting business, said CEO John Chambers,

Cisco said second-quarter sales in its largest business, switching, were down 11 percent, and in its second largest business, routers, fell 23 percent. Even some less established markets were soft. Unified communications product revenue slumped 5 percent and home networking was down 11 percent.

Only a few markets expanded. Security products rose 2 percent and video systems, including set-top boxes, increased 18 percent.

With no sign of a rebound, Cisco forecast sales would plummet a worse than expected 15 percent to 20 percent in the third quarter.

“The length of the downturn is still in question,” said Chambers. “The majority of our customers are guessing 2010 while a smaller group is (looking) to late 2009.”

Chambers said long term Cisco is confident in its 12 percent to 17 percent growth projections, as long as the economy returns to more typical growth rates.

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Posted by Mark Boslet

Intel Puts Brakes On Spending, But Won’t Cut Money For New Technology

January 15, 2009

The economic crunch is having its way with Intel’s finances. Net income was down 90 percent in the fourth quarter and revenue tumbled 23 percent from last year.

Paul Otellini shows of 32-nanometer chips, which are being protected from spending cuts

Paul Otellini shows of 32-nanometer chips, which are being protected from spending cuts

“The pace of revenue decline in the quarter was dramatic,” CEO Paul Otellini said Thursday. “We understand the absolute need for fiscal discipline.”

For this year, spending will drop 700 million and factory production is being reduced because of the slack demand. The company’s key capital spending account will be the same as in 2008 or slightly lower.

But spared the broad paring are expenses on new 32-nanometer production technology, which will allow Intel to make smaller, more energy-efficient chips, said CFO Stacy Smith on a conference call.

Just as in 2001, Intel is making a big bet on the future by roaring ahead with the latest high-tech gear and developing the most advanced factories it can get its hands on.

When 32-nanometer production gets up to speed in 2010, the company will have lower production costs and make chips that run faster, Smith said. It also will manufacture chips that run on less power, permitting it to branch into new markets.

“In this environment, we plan on protecting that investment stream,” he said.

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Posted by Mark Boslet

Online Holiday Sales Show 3% Decline, But That Is Better Than Offline

January 2, 2009

Many online merchants consider this holiday season’s 3 percent sales decline a disaster.

But think of the alternative: selling a real-world store, where sales were more troubling in many consumer categories.

For instance, sales of apparel and accessories were up 4 percent online, but down 19 to 21 percent when brick-and-mortar sales are added in, according to comScore.

Consumer electronics sales suffered a disappointing 5 percent decline online, but that compares to a 26 percent decline for electronics and appliances overall.

Online sales of jewelry and watches were off 24 percent, but the overall category of luxury goods, including them, was down 34 percent.

When the economy rebounds, online sales a set to benefit, comScore said.

Here is a list of the top selling categories online this year:

Sales growth varied by category

Sales growth varied by category

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Posted by Mark Boslet

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