Cisco customers unsure of post-May demands: Chambers

SAN FRANCISCO: Companies buying equipment from Cisco Systems Inc. are not sure how strong business will be beyond about May, Cisco's chief executive said on Friday.

"I think the visibility is tight, and that's not new news. That's what we've been saying for about three or four months. But our customers don't know more than three to four months out what they're going to spend and it's hard for us to project what high-tech (capital spending) will be," Cisco's CEO John Chambers told CNBC.

Most analysts had not expected Cisco to provide guidance beyond the current quarter and Chambers' comments were seen as another sign the company will remain guarded about forecasts beyond that.

Cisco, the No. 1 maker of network gear is expected to report results on February 6. Chambers also said investors should examine company results -- including pro forma accounting many technology companies use to show performance excluding charges -- but to pay close attention to whether companies generate cash.

Cisco and other network gear makers suffered during the telecom spending downturn last year. They are now looking to an economic rebound to give companies and carriers more spending power for equipment such as routers that direct Internet traffic.

Cisco's ability to generate cash -- the company had more than $19 billion in cash at the end of its fiscal first-quarter -- is a selling point in a hard market, said analyst Chet White of Wells Fargo Securities.

"Until the economy gets more stable, they should leverage that point," White said." It helps with their win rate and helps them take market share."

"Instead of a purchase order going to some young company, it'll go to Cisco or a strong peer" as buyers focus on cash being put into research and development and to keeping a company healthy for the long-haul, White said.

Analysts on average expect Cisco to post earnings excluding charges of 5 cents a share in its January ended quarter, versus adjusted earnings of 18 cents a share a year earlier.

Cisco shares closed on Friday at $19.21, down 59 cents, or nearly 3 percent. The shares have gained 9.3 percent year to date but are down 44.2 percent over the past 52 weeks, according to Thomson Financial/First Call.

(C) Reuters Ltd.