Little prospect of European recovery, warns Cisco

Cisco CEO John Chambers has warned that he sees little prospect of a realistic European economic recovery in the next few quarters after its EMEA sales dropped 5% in the final quarter of its financial year, with product orders in the UK down 13% and even Germany not proving immune.

“The primary weakness was across all sections of Europe,” Chambers said on the vendor’s year-end conference call, “with most of our customers not foreseeing improvement in the near future.

“We are modelling Europe to be very challenging over several quarters [and] global public spending will also continue to be challenged,” Chambers continued.

The impact of the Eurozone slump was laid bare as even fast-growing emerging markets in EMEA – such as Russia – were unable to offset the core declines.

Despite the grim outlook, Chambers said he also saw a number of growth drivers that would ultimately balance these challenges.

“First, our solid position in commercial accounts and the strength of our channels, which we never should underestimate how key that is for us. Second, cloud and our ability to expand both our products and architectural wins in the datacentre. Third, Cisco’s expanding value with both traditional and new service providers and new partners, especially in growth areas such as cloud, video, mobility, open architecture and hosted UC,” he said.

Indeed, Cisco had much to be cheerful about, with both full-year and fourth quarter sales and profits heading in the right direction.

In the last three months of its fiscal 2012 Cisco made net sales of $11.7bn (£7.45bn) and net profit of $1.9bn, up 4% and 56% respectively on the year-ago quarter.

Full-year sales grew 7% over 2011 to $46.1bn, and full year net income grew 24% to $8bn, Cisco revealed.

Due in part to its cost-cutting drive and an ongoing restructuring programme, the results came in ahead of analyst expectations.

Image credit: Photo courtesy of Camknows/Flickr

Conference call transcript courtesy of Seeking Alpha