Last Updated Aug 12, 2010 2:05 PM EDT
However, we're in difficult and unpredictable times. You'd think that investors -- and managers at other companies -- would want to know about indicators that conditions were developing differently than anticipated, allowing them to make smarter decisions. That's exactly how they should treat Cisco's report. The world is still shaky, and sometimes someone needs to say that the emperor has no clothes.
Cisco said that profit was up by 79 percent. Revenue was another story.
Cisco said switching revenue grew at a 27% pace in the fourth quarter, while revenue from routing grew 15% year-over-year. In the third period, the company said switching revenue rose 40% and routing 23%.Frankly, this shouldn't be a surprise. There had been a surge in PC shipments because companies were finally making replacement purchases they had put off for some time. But hiring isn't up, so the purchases weren't from increased economic activity.
Jeff Evenson, an analyst at Sanford C. Bernstein & Co., said Cisco's "revenue was a little bit lighter than people expected." Outstanding customer bills were slightly higher than expected, suggesting a jump in sales in the final weeks of the quarter, he said. But that could indicate that demand for Cisco gear is softening because the company tends to ramp up promotions near a quarter's end if sales are below expectations, Mr. Evenson said.
As I've said since last fall, there is significant evidence that the tech sector has only been recovering some lost ground, not really expanding. Cisco CEO John Chamber said the same thing during the earnings conference call when he noted that customers had become more conservative in purchasing behavior and business began to soften in mid-June. And Gartner lowered its IT spending outlook for 2010.
I've seen many people who want to believe that the good times are here again. They're not by a long shot. Everyone should be thankful when circumstances force the truth out of executives and you get some real data that can help inform smart decisions.
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