Innovation

Cisco's John Chambers spooks Wall Street and techies with sour remarks about IT spending

On Wednesday, Cisco Systems reported strong quarterly earnings, beating Wall Street expectations. However, for those who keep a keen eye on the technology sector, some of the remarks of Cisco CEO John Chambers were enough to inspire frowns and raised eyebrows. See why.

On Wednesday, Cisco Systems reported strong quarterly earnings, beating Wall Street expectations. However, for those who keep a keen eye on the technology sector, some of the remarks of Cisco CEO John Chambers were enough to inspire frowns and raised eyebrows. Chambers referred to IT demand from big U.S. companies as "soft" and "lumpy."

I'm not an expert in texture analogies, but I think Chambers (right) was indicating that IT spending in the United States is weak and getting worse. As reported by my colleague Larry Dignan over at ZDNet, Chambers remarked that:

  • Cisco had "some softness" in orders from big U.S. customers;
  • Saw "dramatic year-on-year decreases in orders" from financial services customers, like big banks, who are reeling amid credit problems;
  • U.S. enterprise growth will be "very lumpy" [in the near future].

Read Dignan's piece Cisco CEO Chambers dashes U.S. IT spending hopes for more quotes and the rest of the gory details. (If you watch the financials of public technology companies, I'd recommend following Dignan's posts in ZDNet's Between the Lines blog. Larry does a great job capsulizing the important developments.)

Despite the gloominess, hidden amidst Chamber's remarks was an interesting note of optimism and a prediction that IT spending will bounce back. He said, "We actually think U.S. enterprise has really squeezed their IT departments and they really cut back on the spending. As a CEO, there comes a point in time where you've got to say I've squeezed it pretty tight and if I want innovation for the future, and if we are right about the network enabling these business models, whether it's in two quarters or six quarters — and I wish I could tell you with a high probability which one it will be — I would be surprised if you don't see U.S. enterprise start back up. But we will see if that projection is right or wrong with all the appropriate caveats."

What does IT spending look like in your organization in 2007? If the budget is under pressure, do you see a turnaround coming anytime soon? Join the discussion.

About

Jason Hiner is Editor in Chief of TechRepublic and Long Form Editor of ZDNet. He writes about the people, products, and ideas changing how we live and work in the 21st century. He's co-author of the book, Follow the Geeks.

Editor's Picks