UPDATE 4-Cisco trounces estimates, sees strong recovery

* Fiscal Q2 results, outlook beat Wall St estimates

* First year-on-year revenue growth since October 2008

* CEO says to hire 2,000-3,000 people

* Shares rise 4 pct after-hours

(Adds CEO and analysts’ comments, geographic details)

By Ritsuko Ando

NEW YORK, Feb 3 (BestGrowthStock) – Cisco Systems Inc’s (CSCO.O: )
quarterly results and outlook exceeded Wall Street expectations as
more customers upgraded their networks to handle growing Internet
traffic, leading CEO John Chambers to declare a very strong
recovery.

Shares in the leading network equipment maker rose 4 percent
as the company forecast revenue growth of 23 percent to 26 percent
in the current quarter, far exceeding the average analyst forecast
for a rise of 16.5 percent.

“We’re hitting on all cylinders,” Chambers told analysts on a
conference call, citing a “dramatic across-the-board acceleration”
in the business.

“We saw very strong, balanced growth from a year-over-year
perspective in almost all of the major geographies and market
segment categories,” he said.

He sounded a bullish note for the rest of the technology
industry, predicting a good chance of “solid, sustainable economic
growth.”

Cisco is one of the first major technology companies to report
results that include much of January 2010. Its performance and
outlook are an indicator for the rest of the technology sector,
especially in business spending.

“Their guidance suggests they are feeling very good,” said
Erik Suppiger, an analyst at Signal Hill Group. “It was very
encouraging.”

Chambers also said he expects to hire 2,000 to 3,000 people in
the next few quarters, adding to its headcount of over 65,800,
showing Cisco has emerged from a cost-cutting phase.

RETURN TO GROWTH

Revenue for Cisco’s fiscal second quarter ended Jan. 23 rose 8
percent to $9.8 billion, marking the first year-on-year growth
since the quarter ended October 2008. Analysts, on average, had
expected $9.4 billion, according to Thomson Reuters I/B/E/S.

Net profit rose to $1.9 billion, or 32 cents a share, from
$1.5 billion, or 26 cents a share, in the year-ago quarter.
Earnings excluding special items rose to 40 cents from 32 cents,
beating Wall Street’s average forecast of 35 cents.

“It looks like they beat across the board, both their high end
of guidance, but also some of the more aggressive whispers,” said
Mark McKechnie, analyst at Broadpoint Amtech.

The results come a year after Cisco reported disappointing
revenue and job cuts, stoking fears of a 2001-style freeze in
technology spending. Yet results in the past few quarters have
shown cutbacks were not so drastic, as companies were not as
over-invested in network equipment as they were a decade ago.

Encouraged both by a stabilizing economy and the popularity of
smartphones like Apple Inc (Read more about Apple stock future.)’s (AAPL.O: ) iPhone, Cisco’s customers
have begun buying more routers, switches and other equipment that
support wireless and Internet use.

Cisco said revenue last quarter grew 12 percent in the U.S.
and Canada, and 16 percent in Asia Pacific. Sales fell 3 percent
in Europe, but Chambers said the overall improvement was balanced
enough to suggest a sustainable recovery ahead.

Cisco shares rose to $24.03 in extended trading, after ending
0.2 percent higher at $23.07 on Nasdaq.

LONG-TERM GROWTH

Chambers also reiterated his long-term revenue growth target
of 12 percent to 17 percent, and said the company would continue
investing to expand the business.

Acquisitions and investments in new technologies have helped
turn 25-year-old Cisco into the world’s biggest network equipment
maker with annual revenue in excess of $35 billion. When Chambers
became CEO in 1995, revenue was only around $1 billion.

Despite the upbeat outlook, however, some analysts cited
concerns such as growing competition with Hewlett-Packard Co
(HPQ.N: ), International Business Machines Corp (IBM.N: ) and China’s
Huawei Technologies Co [HWT.UL].

Cisco has recently encroached on HP and IBM’s turf by selling
software, data center servers and a wider range of technology
services. Those companies have in turn retaliated by forging sales
partnerships with other network equipment makers. HP is set to buy
Cisco’s smaller rival 3Com (COMS.O: ).

Chambers said he was not seeing any impact of the growing
rivalry with HP and IBM, but he noted some pricing pressure in
China — a market Cisco sees as a key growth area.

“Cisco’s looking to grow in more markets than ever before.
Their competitive positioning is strong. But at the same they will
have more intense competition,” said Frost & Sullivan analyst
Ronald Gruia.

Investing Basics

(Reporting by Ritsuko Ando; Additional reporting by Sue
Zeidler and Ian Sherr; Editing by Richard Chang, Tiffany Wu, Phil
Berlowitz)

UPDATE 4-Cisco trounces estimates, sees strong recovery