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Filter - Cynthia L. Webb
Cisco's Job Shocker

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_____About Filter_____
Filter looks at the day's top technology news through snapshots and analysis of what the world's media outlets are covering. Washingtonpost.com's new Mon.-Fri. feature is penned by technology reporter Cynthia L. Webb. If a technology story breaks, a company falters or triumphs, or there's a new trend in technology, Filter wants you to know about it.

_____Filter Archive_____
Dell Can't Get No Respect (washingtonpost.com, May 14, 2004)
Google Bets the House on Banner Ads (washingtonpost.com, May 13, 2004)
Xbox Masters the Electronic Arts (washingtonpost.com, May 11, 2004)
Going Public: Everybody's Doing It (washingtonpost.com, May 10, 2004)
Get Ready for Some Hand-to-Hand Combat (washingtonpost.com, May 7, 2004)
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By Cynthia L. Webb
washingtonpost.com Staff Writer
Wednesday, May 12, 2004; 9:39 AM

Silicon Valley, prepare for an earthquake.

No, the San Andreas fault isn't about to slip again. But Cisco Systems's announcement yesterday that it plans to hire 1,000 more workers is sure to bring throngs of out-of-work technology workers streaming into the city hoping that the company's expansion, coupled with Google's IPO, signals that the boom is officially on again.

Cisco's hiring spree "would represent the biggest surge in its workforce since the Internet boom," The San Jose Mercury News noted. The company already "added 214 employees during the most recent quarter, its first increase in workers in three years," the newspaper noted. CEO John Chambers insisted that "the new hiring would be selective -- in areas such as 'new technologies' and 'new opportunities in existing marketplaces.' He cited businesses such as computer security, video technology, data centers and Internet-based phone technology as likely candidates for more jobs."
The San Jose Mercury News: Cisco To Add 1,000 Jobs (Registration required)

The San Francisco Chronicle reported that "[t]o analysts, the decision to start hiring in significant numbers underscores the company's confidence. 'If he's going to add that many, you can bet he feels pretty good about their momentum,' said analyst Aalok Shah at Pacific Crest Securities."
The San Francisco Chronicle: Cisco Posts Record Profit

The hiring news was announced late yesterday in tandem with the company's glowing third-quarter earnings report, which offered more hints that the tech economy is on the mend. "Most of our customer CEOs are beginning to be more optimistic not only about the economy, but also about their own industries and companies," Chambers said in a conference call yesterday, quoted by The San Jose Mercury News. More Chamber-isms, quoted in The Los Angeles Times: "'CEOs are becoming more optimistic about the economic direction and their own companies,' Chambers said. In turn, he said, 'I continue to be more optimistic than I was going into the last quarter.'"
The Los Angeles Times: Cisco's Earnings Up 23% As Sales Surge (Registration required)

The Merc noted Cisco's "quarterly profit rose 23 percent and sales jumped 22 percent over a year earlier as businesses spent more to upgrade technology. The results provided further evidence that tech spending has emerged from the economic downturn." The Financial Times struck a similar chord, saying Cisco's results "provided further evidence of a recovery in technology spending by announcing third quarter revenues and earnings ahead of Wall Street expectations."
The Financial Times: Cisco Creates 1,000 Jobs As Spending Recovers

The Wall Street Journal reported that Cisco's latest earnings mark "a sharp contrast to cautious comments made three months ago regarding demand for computer-networking equipment. Cisco, which tends to play down its own prospects, said it expects continued strong revenue growth in the current quarter, which ends July 31." And as for any Cisco naysayer worried with the company's newfound bullish approach, Chambers had this to say in an interview with the Journal: "We wouldn't be hiring if we didn't think the business opportunity outweighs the risks."
The Wall Street Journal: Cisco's Earnings, Revenue Climb as Demand Rebounds (Subscription required)

No Irrational Exuberance Here

Like other CEOs at tech heavyweight firms, including Craig Barrett at Intel and Sam Palmisano at IBM, Chambers "warned that though companies are loosening their purse strings and making investments in network improvements, there's a risk that global instability, rising interest rates, the volatile stock market could lead to more cautious spending," The Associated Press reported. Cisco "was hit hard by the tech downturn that started in late 2001, but mostly stayed profitable through aggressive cost cutting as well as capturing additional market share even though demand for new gear was shrinking. The company also has branched into other areas, including Internet telephony, storage, wireless networking and security."
The Associated Press via washingtonpost.com: Cisco Reports Strong 3rd-Quarter Results (Registration required)

More on the reasons for Cisco's cautious optimism: "Chambers tried Tuesday to keep expectations from outrunning what is still a slow recovery. Sales should grow another 3 to 5 percent in this quarter, he said -- hardly breakneck speed. But orders from Cisco's main customers -- large corporations, or enterprises -- are finally rising after several dismal or sluggish years. 'This is the first major growth, adjusted for seasonality, that we've seen in U.S. enterprise in a very long time,' Chambers said," The San Francisco Chronicle reported. The Financial Times said "Chambers' comments are likely to reassure investors that demand for information technology products such as computers and networking equipment remains on track for a modest recovery this year."

While tech stocks traded up yesterday before Cisco's numbers were released, Wall Street indicated this morning that it is going to play hardball with the company. "Shares of Cisco Systems Inc. slipped 1.2 percent in pre-market trading on Wednesday on inventory concerns and mild disappointment with the company's outlook for its current quarter," Reuters reported. Cisco "shares fell 50 cents to $21.75 in after-hours trading on the news, released after the stock market's close. Cisco shares have dropped 10% since early April," USA Today said. "Some investors still expect booming growth from tech companies, and Cisco is too mature to deliver it, says CIBC World Markets analyst Steve Kamman."
Reuters: Cisco Slips In Pre-Open Trading
USA Today: Cisco Plans To Add 1,000 Workers, Most In USA

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