Cisco's Q4 sails over US economic slump

"Despite" is clearly the golden word for financial reports of major US tech corporations.

If a company is massive enough, it's got tendrils wrapped outside the sluggish domestic market. Investors demand growth — and desired numbers presently lie abroad in emerging markets such as China and India.

Cisco, often used as a bellwether for the American tech sector, has been offering gloomy forecasts on the economy for some time now. Despite this, its margins have held pretty comfortably thanks to its expanding reach.

It's been a pretty common theme for many big names in IT these past few quarters.

The networking giant's fourth quarter sales increased 9.9 per cent year-over-year to 10.4bn. Net income advanced to $2bn from $1.9bn in Q4 2007.

CEO John Chambers noted the quarter was a record-breaker for the company, as it was the first time it hit the $10bn mark for quarterly sales.

"Today's strong results demonstrate the company's ability to execute," said CEO John Chambers in a statement. "The market is clearly in transition, and we will use this time as an opportunity to expand our share of customer spend and to aggressively move into market adjacencies."

For the full year, Cisco's net sales were $39.5bn, up 13.2 per cent from $34.9bn in 2007. Net income rose 9.8 per cent to $8.1bn.

The numbers were on the short side of Cisco's long-term forecast for 12 per cent to 17 per cent growth. While Chambers said Cisco saw a rebound in enterprise IT spending in the US, he expected the current economic challenges to remain "for the next few quarters."

Cisco said its areas of solid momentum were emerging markets — and also Japan, where service providers are ramping up next-generation infrastructures.

Broken down by region: China order growth was 30 per cent year-over-year, orders in India were up 20 per cent, Mexico and Russia (we're not sure why they're put together either) grew 40 percent, and Brazil orders grew 30 per cent.

Meanwhile in the European market, order growth was about 11 per cent year-over-year. US and Canada order growth was 7 per cent.

Chambers warned that the US market still requires monitoring going further, and said there was a possibility of the challenges spreading to other geographies.

By products: router revenues for the year grew by 14 per cent, switches by 7 per cent, and networking services grew 36 per cent.

The future is now

Cisco estimates its fiscal first quarter 2009 revenue will fall in the range of $10.21bn to $10.4bn.

Chief financial officer Frank Calderoni said the company wasn't comfortable offering revenue guidance for the full year due to the unpredictability of current economic conditions. However, Cisco doesn't have a problem predicting the first half of fiscal 2009. The company expects Q2 2009 revenue growth in the range of 8.5 per cent year-over-year. ®