Cisco Swagger Returns With Stellar Q2 Results

Chambers suggested that the second quarter represented "the second phase" of an economic recovery that began during Cisco's first quarter. Chambers traced Cisco earnings back several quarters and said Cisco had pinpointed its Q3 of 2009 as the "bottom" of the downturn.

For the quarter ended Jan. 23, Cisco posted $1.85 billion in earnings, at 32 cents per share, up from $1.5 billion, at 26 cents per share, from the same quarter a year ago.

Cisco's revenue for the quarter was $9.82 billion, an increase of 8 percent year-over-year, and well above the 1 to 4 percent revenue increase Cisco had predicted for the quarter in November. Most analysts polled by Thomson Reuters were predicting quarterly revenue in the $9.4 billion range.

Chambers said that all of Cisco's theaters had flat to double digit productivity growth during the quarter, whereas in Cisco's first quarter, only its Japan business grew. Chambers also said that productivity was likely higher than the numbers suggested, because many of Cisco's 30 adjacencies -- that is, those segments and vertical markets that Cisco has targeted and invested in as growth opportunities -- did not yet have measurable material contributions to Cisco's balance sheet.

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Cisco layoffs continued throughout 2009, but Chambers also indicated that Cisco would seek to hire 2,000 to 3,000 new employees over the next few quarters.

The capital spending environment for Q2, he said, looked "very strong," and Cisco posted growth in a number of product segments, including fixed switching, high-end routing and video systems. Its enterprise business grew 10 percent year-over-year, and its government business 2 percent. Service provider business -- perhaps Cisco's biggest triumph for the quarter -- grew by 21 percent, according to Cisco's earnings statement.

For a segment that was down upwards of 30 percent just three quarters earlier, Chambers said, the service provider uptick represented one of the "most robust positive turnarounds I've seen in my career."

Cisco's overall product sales grew 8.6 percent in the quarter, while services grew 5.6 percent. Among specific products, switching was up 13 percent, routers were up 2 percent, high-end routers (in which Cisco included results from its recently completed acquisition of Starent Networks) were up 12 percent, and unified communications was up 17 percent.

Among other product segments, Chambers touted strong growth in Flip digital cameras ($130 million in revenue, up from $50 million in revenue in Q1) and Cisco's Nexus family.

Cisco did not offer numbers for its Unified Computing System (UCS), the packaged data center offering that combines networking and storage equipment with blade and rackmount servers. Chambers did say that UCS order rates were up 100 percent sequentially from the previous quarter, and that 400 customers had ordered UCS configurations from Cisco so far.

Cisco offered no guidance on its pending acquisition of Tandberg, though Chambers said Cisco expects the acquisition to be completed within the next three to four months. Responding to a question about how much telepresence was contributing to Cisco's unified communications growth, Chambers said Cisco would discuss telepresence at length on the company's Q3 earnings call.

Overall, Chambers suggested there was no reason to expect the IT industry wasn't in recovery.

"If we get surprised," he said, "we will adjust."