Cisco hails recovery with solid Q1 results

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Cisco hails recovery with solid Q1 results

Paul Kunert

Cisco CEO John Chambers is certain the economic recovery is a reality after hailing the highest sequential gains for Q1 revenues and profits in five years.

However, such is the lingering uncertainty that was inflicted by the recession that the networking giant refused to provide revenue guidance beyond the next quarter, citing the potential for nasty surprises.

Sales for fiscal Q1 2010 ended 24 October were $9bn, down 13% year-on-year but up 6% on the previous quarter, and profits followed a similar trend falling 19% on the year ago period and soaring 64% sequentially.

The results were no doubt bolstered by a 10% reduction in op-ex, an area of the business which Cisco can control.

"We believe that the recovery is now occurring, "said Chambers but he sounded a cautionary note, "no one knows for sure how strong it will be, how long it will last or the extent of new job creation."

He reiterated that the previous quarter was "clearly the tipping point, marking the beginning of an upward trend from a sequential orders point of view".

"Almost all of our financial sequential measurements from Q4 fiscal year 2009 to Q1 fiscal year 2010 were at the high end or even above the same period as the Q1's for the last five economic years," said Chambers.

Total product revenue fell 17% year-on-year to $7.2bn and total services revenues grew 7% to $1.8bn driven by strong margins in technical support and advanced services.

Split by products, sales of switches fell 21% year-on-year to $2.9bn, router shipments dropped 17% to $2.9bn, Advanced Technologies dropped 15% to $2.3bn and Other products including telepresence went up 9% to $481m.

Sequentially nearly all product segments increased in revenues with modular switching up 11%, mid-range routing rising 9%, wireless LAN climbing 32% and security increasing 16%.

Sales in the North America fell 10%, emerging markets fell 30%, Asia Pacific and Europe were down 6% and 15% respectively.

Chambers mooted the possibility that op-ex may start to rise now as the recovery gains momentum but he warned "growth in head count will be very targeted".

Cisco reckons revenues will rise 1% to 4% in Q2 but it will only provide guidance "one quarter at a time" and urged analysts to think of this financial year in terms of two halves from a "planning and expectation perspective".

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