Cisco profits beat forecasts

Cisco boosts tech recovery hopes

Cisco Systems, the world's largest internet equipment maker, has cheered investors with news of higher than expected profits and sales.

The company said on Wednesday that profits before one-off expenses for the three months to late January came in at $644m, down from $1.3bn the year before, but nearly double what analysts had expected.

In almost every area of our business we've seen positive evidence of our strategy working

Cisco president John Chambers

Sales for the period reached $4.8bn, outstripping the $4.5bn predicted by analysts.

Cisco Systems shares rallied on the news, closing 11 cents up on the day at $18.61, down from an earlier high of $19.40.

Positive signs

"In almost every area of our business we've seen positive evidence of our strategy working, " Cisco President and Chief Executive John Chambers said.

The company's latest results have exceeded its own cautious forecasts at the time of its last financial statement in November.

Investors had been primed for upbeat news earlier on Wednesday, when the company said in an unscheduled announcement that new orders for the period rose to $3.9bn, beating its own target of $3.75bn.

Cisco claimed it decided to make the new order figures public after accidentally distributing them to a wider than intended group of managers on Wednesday morning.

Tech recovery hopes

News of Cisco's improved performance has raised hopes that a slump in demand for computer and internet-related equipment may be coming to an end.

Cisco, a leading supplier of internet networking equipment to major corporations, is seen as a bellwether for the wider technology sector.

An upturn in the company's sales suggests that corporate investment in networking hardware may be picking up after a year-long spell in the doldrums.

The company was one of the biggest stars of the late 1990s technology boom, when companies poured money into networking systems in order to meet an anticipated surge in e-commerce.

Cautious outlook

However, Mr Chambers warned that it remains too soon to count on an imminent recovery.

He told analysts that sales to European and US internet service providers declined during the latest period compared to the previous three months.

The Cisco chief also downplayed prospects for a broad-based upturn in the global economy.

"In our opinion, no one is really sure," he said.

The company predicted that sales growth over the next three months is unlikely to rise above the "low single-digit" range.