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Cisco profits slip 19%, but pass 'tipping point'

Signs of recovery sighted

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Cisco's fiscal first quarter profit dropped 19 per cent based on lower sales, but the networking equipment giant believes it had already hit the recession's bottom in Q3 and is optimistic about the overall economic outlook.

Chief executive John Chambers said results in Cisco's fiscal Q1 2010, which ended October 24, "continue to reflect strong sequential growth trends that meet or exceed expectations during normal economic times."

The company vowed during its investor powwow Wednesday to set a course assuming an optimistic view of the economy, and to aggressively invest in new and adjacent markets in the current quarter.

"Given our belief that the market is starting to accelerate, don't be surprised when we start to accumulate expenses," said Chambers.

Cisco reported Q1 net profit of $1.8bn, down 18.8 per cent compared to the same period last year. Sales during Q1 totaled $9bn, down 12.7 per cent versus last year.

The company reported total cash, cash equivalents, and investments of a whopping $35.4bn.

Chambers told investors that Q4 2009 appears in hindsight to have been the "tipping point" of the recession, noting that there's currently "solid indication of economic recovery in locations across the world."

He also predicts an upswing for the current quarter.

The company forecast that revenue in fiscal Q2 will increase between one to four per cent year-over-year. But Chambers warned of uncertainties beyond that, advising investors to "break fiscal 2010 into two halves" and not assume things will be so cheery in Q3 and Q4 until the company provides future quarterly data.

Cisco also announced they were adding up to $10bn more to their share buyback program, which now totals around $13.1bn. ®

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