Cisco: U.S. Market Is Soft

Yes, the U.S. economy is in a slowdown, but according to Cisco it’s not a meltdown. In fact, Cisco CEO John Chambers remains cautiously optimistic about Cisco’s prospect in the U.S., North America and on a global basis for the rest of the year and beyond.

During Cisco’s Tuesday earnings call for its third fiscal quarter of 2008, CEO John Chambers announced results that still showed growth despite the economic slowdown.

On a non-GAAP basis, Cisco reported its net income for its third fiscal quarter of 2008 was $2.3 billion ($0.38 per share), which was a 9 percent improvement over the third quarter 2007. On a GAAP basis, net income was reported at $1.8 billion which was a decline of 5.4 percent over the third quarter of 2007. The GAAP loss was attributed by Cisco to costs related to the acquisition of Nuova systems.
Net Sales also rose at the networking vendor to $9.8 billion representing an increase of 10.4 percent on a year over year basis.

“From a U.S. perspective the market did soften,” Chambers said during a conference call to discuss results today. “When our largest market is growing in the mid single digits it’s difficult to grow our total market about the 10 percent range.”

Chambers said he’s optimistic that Cisco would eventually return to growth rates of 12 to 17 percent for its business. Geographies outside of the U.S., and in particular Japan are actually growing. As well Chambers believes that the Web 2.0 trend will continue to fuel Cisco’s growth as service providers and enterprises build out their networks to meet the challenges of collaboration and video.

Cisco has plenty of new products in the pipeline. During the quarter, it releasted the ASR 1000, Nexus
and the AXP module for the ISR

When asked during the questions and answer period of the investor call why he remained optimistic even though the economy is down, Chambers responded stoically about the value of IT.

“It really comes back to do you believe, and I clearly do, the role that IT will play in productivity?” Chambers said. “When you think about it, if you can grow at 10 percent when your largest country that represents about 47 percent of your business grew in mid single digits that’s not a bad quarter.”

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