Cisco expects flat Q1

CFO to Retire

Cisco Systems Inc's president and CEO, John Chambers, struck a steady as she goes attitude as he unveiled the vendor's fourth quarter results yesterday and forecast flat to slightly up revenues for the first quarter.

However, Chambers also revealed the firm's veteran CFO, Larry Carter, would retire next year, when he turns 60, a move that might spook some investors. Cisco's shares were hit last week following rumors that Carter and Chambers could both be leaving the firm

San Jose, California-based Cisco turned in sales of $4.8bn for the fourth quarter ending July 27, a 12% rise on last year. Operating profits were $947m, compared to a $137m loss last year. Net income came in at $772m, compared to $7m last year. On a proforma basis, net income was $1bn, compared to $163m a year ago.

For the year to date, sales were down 15.2% to $18.9bn, generating net profits of $1.9bn, compared to a $1bn loss a year ago. Proforma income to date was $2.9bn, compared to $3bn a year ago.

Chambers said the company was sticking to its "break away" strategy in the face of an uncertain economy. "We continued to focus on what we can control, and the results speak for themselves." He said the majority of the firm's financial metrics were close to what they were in boom years of the 1990s.

Chambers said that enterprise customers were "cautious but steady in spending, with the commercial market remaining healthy. However, the service provider market is still a quagmire.

The firm was facing a "show me" economy, he said, with capital spending unlikely to increase until customers were convinced their own markets were turning the corner. As the US economy picks up, he said, the commercial market should show the benefit first, followed by the enterprise sector, and finally, some way in the future, the service provider market.

Chambers said the firm expected to see first quarter revenues flat to up slightly. Its book to bill ratio could be slightly below one. The company did not make an earnings forecast, but said it expects gross margin to be in the mid 60% range.

While the figures may give some heart to investors who see Cisco as a linchpin of the digital economy, some may be dismayed by the prospect of Larry Carter leaving the firm. Chambers said Carter planned to retire next May, but that he was doing what he could to persuade him to stay with the firm.

That said, Chambers also made great play of the company's leadership development strategy, adding it was taking advantage of the economic downturn to boost its executive cadres, and the firm had succession plans for all its leaders.

© ComputerWire