Cisco sees revenue, earnings hike in Q1; plans hiring freeze

Cisco Wednesday recorded a 5% hike in first-quarter earnings on an 8% increase in sales.It also said it plans to institute a hiring freeze as it braces for further economic turmoil.

For the period ended Oct. 25, 2008, Cisco posted first quarter net sales of $10.3 billion, and net income - excluding certain items - of $2.5 billion, or 42 cents per share. This is 3 cents per share better than analyst estimates.

“We had a solid quarter, especially with the many challenges in global marketplace,” Cisco CEO John Chambers said in a conference call on the quarter. Chambers later added that he believes Cisco has “the strongest position in customer relationships in the enterprise and service provider” markets.

Switching revenue was $3.6 billion, up 8% from last year. Routing revenue was $1.9 billion, up 1% from Q1, ’08.

Advanced Technologies, which includes unified communications, wireless LAN, video, security and networked home, was $2.7 billion, up 17% from last year. Unified communications grew 22%, WLANs 21%, and security 19% from last year, Cisco said.

“Other” products, including optical and cable, was down 13% from last year.

Chambers noted, however, that the economic challenges now gripping the U.S. have spread to Europe, Asia and emerging market countries. As a result, Cisco’s order growth during the quarter underwent “dramatic variability,” Chambers said, with solid mid-to-high- single digit growth in August becoming a 9% decline in October.

While Chambers said he's confident that Cisco can weather -- and ultimately even prosper from -- the current economic storm, he outlined ways that Cisco plans to cut back. The hiring freeze, combined with other efforts such as a reduction in travel, events and marketing expenditures, should help the company reduce expenses by $1 billion from its original budget for its second quarter, he said during a conference call Wednesday.

Orders in the U.S. were down 8%, with enterprise orders declining in the high-teens. Globally, enterprise orders were down 11% in Cisco’s first quarter, compared to flat order growth for other company markets.

That’s casting a pall on Cisco’s second quarter. The company expects revenue to decline by 5% to 10%.

Nonetheless, Chambers says he’s sticking to long term growth rates of 12% to 17%, assuming the economy returns to “normal growth.”

“Our goal is to become the top communications and IT company,” he said.

Additional reporting by Nancy Gohring of the IDG News Service.