Cisco CEO's Cautious Outlook - InformationWeek

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Cisco CEO's Cautious Outlook

As goes Cisco, so goes the networking market. Cisco Systems serves as a bellwether for the IT networking sector; when Cisco sneezes, the rest of the market catches cold. Despite a strong quarterly performance disclosed last week, CEO John Chambers expressed a cautionary note about near-term spending by IT buyers. The immediate reaction: Cisco led a decline in stock value among IT companies.

Chambers, speaking to financial analysts, said the war, growing deficits, and soaring oil prices could curtail IT spending. Customers' IT budgets have grown in recent quarters, he said, but future growth will be restrained, increasing only a percentage point or two for the remainder of the year.

Analyst Mike Kahn, founder of the Clipper Group IT advisory firm, says the networking sector awaits a signal for better days, though the current situation is better than the years following the dot-com bust. "The market is firming up, but it's not firm yet," he says.

What should help Cisco and its networking-sector competitors? Kahn points to money-saving projects such as infrastructure consolidation, which, he says, will continue strongly the rest of the year. "CIOs are still squeezed on capital spending," he says. "If they could plug some holes in the dam, they will."

Still, for Cisco, its fourth quarter was a record-breaking one, including its highest earnings per share ever. "The investments we've made in emerging markets around the world," Chambers said in a statement, "... are generating record results."

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