Cisco still cautious about U.S. economy

Cisco Systems beat analyst expectations, but the company said it still sees spending on IT in the U.S. being tight for the next couple of quarters.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon

Network equipment maker Cisco Systems beat analyst expectations when it reported earnings Tuesday, but its lukewarm guidance showed that the slowing U.S. economy is still impacting the company.

Cisco, the world's largest supplier of equipment that shuttles traffic around the Internet, reported a net profit for the fiscal quarter of 2008 of $1.8 billion. This was down from profits of $1.9 billion in the same quarter a year ago, but it still beat analyst expectations.

Cisco graphic

Revenue for the quarter was up 10.4 percent to $9.8 billion. The company had forecast an increase in revenue of 10 percent.

Analysts believe that Cisco's results mean the company's business is stabilizing. But the sagging economy will still continue to impact its earnings for the next few quarters.

Last quarter, CEO John Chambers said the company was seeing a slowdown in technology spending in Europe and the U.S. And he predicted it would take two to five quarters for things to rebound.

On Tuesday's conference call, Chambers said that spending in the U.S. is still tight. And he anticipated that budgets will be constrained through at least the next two quarters. He said the company will likely see sales growth in the 9 percent to 10 percent range in the quarter that ends in July. But he maintained that the company's long term forecast of 12 percent to 17 percent revenue growth is still doable, indicating that he thinks the slump will be short-lived.