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Cisco woe as HP's Fiorina joins board

Is she advising on how to handle missed profit targets?

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The outlook for networking giant Cisco took a gloomier turn yesterday after the publication of a pessimistic report by an analyst and an admission by its chief executive John Chambers that the current quarter is "a little bit more challenging" than expected.

"Is the economy slowing? Absolutely - it is slowing faster than people realise," said Chambers.

"When people look to cut costs, we'll be nicked. But we will be less affected than others," he added.

Despite this note of caution, Cisco is sticking by its earnings and sales estimates. Its results are due on February 6.

Consolidation in the US telecoms market has resulted in a slow-down of demand for the high-end networking equipment from service providers. Cisco is probably better insulated from this effect than its competitors, because of its wide product base, but a slow-down in the enterprise space would leave Cisco facing a double whammy of a slowdown in its two key market segments.

Most analysts expect Cisco to benefit from the demand for faster networks, but the view is far from universal. Earlier this week CIBC World Markets analyst Steve Kamman said in a research note that Cisco's glory days may be over, arguing that its strategy of keeping itself at the technological edge through acquisitions is about to hit the buffers.

In related news, Cisco announced that Hewlett-Packard's chief executive, Carly Fiorina, has joined its board as a non-executive director. Fiorina was previously president of Lucent's global service provider business.

Earlier this week it emerged that Fiorina's gave back $625,000 of her HP salary because the company missed earnings targets. Cisco has never failed to meet its targets, so is it too mischievous to ask whether Fiorina has been brought in the advise on how this might be managed gracefully at Cisco? ®

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