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Cisco profits (nearly) cut in half

'The toughest economic challenge of our lifetime'

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Cisco's fiscal year has ended on a low note. Net income for its fourth quarter totaled $1.1bn, a dive of over 46 per cent from the same quarter last year.

But CFO Frank Calderoni prefers to look at the year in total. As he pointed out, the quarter-to-quarter match-up is "a tough comparison, given that Q4 '08 was the highest revenue-generating quarter in Cisco's history."

If you look at the full fiscal years, the numbers weren't as drastically dismal. Net income for the full fiscal 2009 year - which, for Cisco, ended on July 25th - was down 23.8 per cent, from $8.1bn in 2008 to $6.1bn in 2009.

CEO John Chambers characterized the current climate as "clearly the toughest economic challenge of our lifetime." But after reporting on that challenge Chambers performed one of the prime duties in every CEO's job description: putting the best possible face on the numbers. In his comments he emulated the proverbial stable boy and kept shoveling. But he came up with what he identified as a pony: a quarter-on-quarter rise in orders.

"Q4," Chambers noted, "had both the first positive sequential product-order growth and was also the first quarter in the entire fiscal year that was anywhere close to having normal sequential-order seasonality."

Translation: Orders were up from the previous quarter, and their growth rate approached being normal for that time of year.

"For me, personally," he said, "this was the most important take-away in the quarter. In other words, while it is too early to say that this is a definite trend and therefore the much-anticipated recovery, the sequential-order numbers were very solid and more along the line of our normal, seasonal quarterly results for the first time in the last four quarters."

But Chambers also cautioned against excessive optimism: "While this is a very important trend," he said, "I would want to see the sequential trends continue for several more quarters before we would be comfortable with saying that we are returning to normal business momentum."

But putting a happier face on that note of caution, Chambers concluded that "If we continue to see these positive trends for the next one to two quarters, we believe that there is a good chance we will look back and see that the tipping point occurred in Q4."

Cisco turns 25 next year. If Chambers's guarded optimism turns out to be justifiable, the celebration might be more upbeat than had that anniversary occurred during the company's just-completed fiscal year. ®

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