Cisco beats profit forecasts, is upbeat about future

Cisco Systems csco said its quarterly earnings plunged, but profits easily beat Wall Street expectations, and the tech giant strongly suggested the worst may be over.

The results offer fresh evidence that the tech sector may be finally emerging from an economic downturn that depressed sales the past year and caused many firms — including Cisco — to shed thousands of jobs.

"While it is too soon to call it a recovery, (fourth) quarter orders were in line with seasonal averages," Cisco CEO John Chambers said in a phone interview Wednesday.

Chambers said the period appeared to be a return to normal for Cisco's business for the first time in four quarters. If trends keep improving, he said, there's a good chance the latest quarter was a "tipping point."

The company said orders from the previous quarter grew by double digits in the U.S., Asia Pacific, Japan and emerging markets. European orders grew in the single digits. Year-over-year, however, orders were down in all those markets.

Cisco expects a slight increase in revenue in the current first quarter compared with the just-completed one.

The Silicon Valley company, which sells routers and switches that direct Web traffic, said earnings for its fiscal fourth quarter slumped 46% to $1.1 billion, or 19 cents a share, from $2 billion, or 33 cents, in the year-ago quarter.

Earnings excluding one-time items were 31 cents a share, beating the average analyst forecast of 29 cents, according to Thomson Reuters.

Quarterly revenue fell 18%, to $8.5 billion from $10.4 billion a year ago.

Cisco shares dipped 3.5%, to $21.39 in after-hours trading. Cisco announced its results after markets closed.

Jeff Evenson, a data-networking analyst at Sanford C. Bernstein, said the results showed strong profitability and sequential growth.

Another encouraging sign is that small businesses are expected to spend $7 billion on networking technology in 2010, Cisco said.

Cisco has been hit hard as customers delay purchasing computer networking gear. But its robust profit margins and $35 billion in cash and investments have helped it weather the downturn.

The company has also overseen an austerity program that resulted in the layoffs of about 2,000 employees in the last two quarters. Cisco is now fully focused on growth, Chambers said.