Cisco CEO: IT spending crunch isn't that bad

A week after Cisco said customers in the U.S. and Europe had slowed IT spending, John Chambers says he doesn't think the the downturn will last long or run deep.

BARCELONA, Spain--Cisco Systems' CEO John Chambers gave a little more color Monday to comments he made last week regarding a slowdown in IT spending.

John Chambers
John Chambers Cisco

Chambers, speaking at a preview event at the Mobile World Congress ahead of his keynote speech Tuesday, told analysts and reporters that the company only started seeing a slowdown in customer orders of its networking products in January, the last month of the second quarter of Cisco's fiscal year 2008. He also said that the current blip in orders is not as bad as previous downturns, most notably the major telecom bust of 2001.

"In situations like this, the classical approach is to look at how long will this last and how deep will it go," he said. "Based on what we've seen in the past, we think this will be relatively short in duration and relatively shallow."

Last Wednesday Cisco beat analysts' second fiscal quarter sales, but the company indicated that its orders on new products had slowed in Europe and the U.S. as companies pulled back on technology spending. The company said it expects growth in the third quarter of only 10 percent instead of Cisco's long-term growth rate expectation of between 12 percent and 17 percent, a range that Chambers expects the company to get back to within the next two to five quarters.

The news last week spooked investors, who sent the company's stock down about 8 percent. Cisco reported second quarter revenue of $9.8 billion, compared with $8.4 billion in the period last year. Net income for the quarter was $2.1 billion, up from $1.9 billion last year.

 

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