Profits up at Cisco but sales slip

Aggressive cost cutting by internet equipment maker Cisco Systems has helped boost quarterly profits by 35%.

But the company's sales continued to slip against the backdrop of a flat IT market.

President and CEO John Chambers said demand in the next quarter would remain weak.

Cisco's results are closely watched as a barometer of the health of the technology sector and the wider US economy.

Falling sales

Tuesday's figures beat Wall Street expectations but still reflected a general malaise in IT spending.

We are positioning ourselves for growth as the economy recovers, whenever that may be

John Chambers

Cisco sold $4.6bn worth of routers, switchers and other networking hardware, software and consulting services, down from the $4.8 bn it sold in the same quarter last year.

The value of Cisco's investments also dropped.

The company reported quarterly net profits of $987m, or 14 cents a share, 35% up on the $729m, or 10 cents a share, it made in the same quarter a year ago.

'Challenging' market

Cisco slashed research and development spending to $703m in the quarter, compared to $807m in the same quarter last year.

It also shaved sales and marketing costs to $1.02bn, down from $1.06bn in the same quarter of 2002.

Mr Chambers said the market for networking equipment remained "very challenging".

He said revenue growth for the next quarter would be flat, adding that Cisco executives had a "normal sense of paranoia" about performance in the coming months.

"We are positioning ourselves for growth as the economy recovers, whenever that may be," Mr Chambers told reporters in a conference call.