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Cisco 'cautiously optimistic' about future

Cisco Systems reported an increase in net income on slightly lower net sales for its fourth quarter compared with last year and said it sees signs to be "cautiously optimistic" about the future.

Cisco's net income for the three months ending 26  July came in at $982m (£608), up from $772m in last year's fourth quarter.

Pro forma net income for the fourth quarter was $1.1bn (£681m) compared with $1bn in the same quarter last year.

Net sales for the fourth quarter of Cisco's 2003 financial year amounted to $4.7bn (£2.9bn), down from $4.8bn in the same period a year ago.

In the quarter, Cisco completed the acquisitions of IP (Internet Protocol) telephony software company SignalWorks and home and small business networking supplier Linksys Group for about $16m (£9.9m) and about $480m (£297m), respectively.

Cisco believes the investments and strategies of the past three years are paying off and that the company is well positioned for an economic rebound. In fact, the company's high-end routing and switching market showed "solid sequential growth", the company said. 

"We are seeing some very early signs that, with the appropriate caveats, could be interpreted as cautiously optimistic," Cisco president and chief executive officer John Chambers said. The fourth quarter was "a solid quarter", he added.

Cisco sees a "cautious but potentially meaningful" increase in the confidence of chief executive officers at customer companies and other signs that an economic recovery may be happening, Chambers said.

The company noted an uptake in orders from medium-sized businesses and was pleasantly surprised by sales of its high-end routers and switches.

However, while things are starting to look better, the economy is still fragile and may not develop to the level Cisco would like to see, Chambers said. A recovery would start in the US with small and medium-sized businesses leading the pack.

Looking ahead, Cisco expects sales to nudge up in its existing first quarter from the fourth quarter. Revenue is expected to grow by between 2% and 4%.

Joris Evers and Stephen Lawson write for IDG News Service

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