Emerging Tech

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 the Global Editor in Chief of TechRepublic and Global Long Form Editor of ZDNet. He is an award-winning journalist who writes about the people, products, and ideas that are revolutionizing the ways we live and work in the 21st century.

5 comments
Marko ONO
Marko ONO

He made his margins years ago. Remember Mr.Chambers recent outsourcing remarks? We (U.S. techs) were the ones fighting for new (his) equipment, but we were outsourced. We're doing more with less each year! He'll get over it and used to it.

mark9009
mark9009

Average salary over 6 years = 53 mil. OK it includes bonuses and stock options. But 53 million x 6 years = 318 mil? Wonder if they could outsource him for less? Wonder how many people got laid off to make some margins? Must have a pretty decent parachute to boot. He'll navigate through the bumps of the economy just fine. stupid money to pay one person year after year.

CG IT
CG IT

for the SMB market heck yeah. Cisco products are to pricey. What Cisco is realizing is what Microsoft also is realizes but doesn't say anything about, that corporate customers can not continue capital investment in IT infrastructure hardware and operating system software every 3 to 5 years. Computer technology changes rapidly but it's not economical to change as the technology changes.

jasonhiner
jasonhiner

I posted the sour remarks of Cisco's John Chambers about U.S. IT spending: http://blogs.techrepublic.com.com/hiner/?p=567 Does this reflect what you're seeing? If your budget is under pressure, do you see a possibility of IT spending turning around any time soon?

mikey3211
mikey3211

I'm about to go through and do a complete upgrade of the IT here for a high profile SMB here in Australia. I'm under a lot of budget pressure by the board, however at the same time I'm not allowed to do any innovation. I must use "brand name" systems with off the shelf software configuration but cannot use any "unproven" technology (read less than 2 years old or opensource - SCSI rather than iSCSI or Enterprise grate SATA. Virtualisation is a no-no ). This results in having to choose underpowered hardware, 3rd rate software and tightly limited spending on specialists to configure it. The fact that I have the facts and figures to back things up is totally immaterial.

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