Cisco warns of cautious enterprise IT spending

John Chambers, CEO of networking equipment vendor Cisco, has warned investors that enterprise organisations are cautious about investing in IT in the uncertain economic environment.

“[Customers] have said their plans are to spend more in the second half of the year,” Chambers said on a conference call with investment analysts yesterday. “However, in the very next sentence they said, we are waiting to see what happens in Europe and what happens with government policy.”

“When I talk to my peers in the industry, we can almost finish each other’s sentences on what we’re seeing around the globe from the enterprise customers. Again, not a view that things are turning down, but just very steady improvement and an uncertain and cautious wait-and-see type of environment.

“We sure don’t like the trend in the enterprise IT spending,” he added.

Chambers made his remarks after Cisco issued its latest quarterly financial figures. Revenue rose 7% year-on-year during the three months ending April 28, up to $11.6 billion, while net income grew 20% to $2.2 billion.

However, Cisco forecast revenue growth for the next quarter of just 2% to 5%, due in part to “feedback from our customers on conservative IT spend, as well as the macroeconomic climate especially in Europe”. This caused Cisco’s share price to drop 9%.

Chambers provided some insight into the success of Cisco’s emerging product lines. Sales of its UCS data centre stack, he said, saw “year-over-year growth of approximately 57%. This was especially pleasing, given that our two largest data centre competitors appeared to be flat or a negative growth in this area.”

However, revenue from its collaboration systems, which include web conferencing, unified communications and social collaboration offerings, was flat. This was “not where we expect it to be,” said Chambers. “We are putting an aggressive action plan in place with specific focus on our sales execution. Part of this challenge is market-driven and part of it is our need to execute more effectively.”

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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