In the Web Age there may be no better bellwether than Cisco Systems, the dominant maker of networking gear. So it was welcome news for investors when CEO John T. Chambers hinted at brighter days ahead after Cisco reported fiscal fourth-quarter earnings on Aug. 5.

Although sales in the quarter ended July 31 fell 18 percent from a year earlier, to $8.5 billion, Chambers said he expects sales in the current quarter to rise 1 percent to 3 percent from the quarter that just ended. That’s a tad better than the flat sequential sales growth the company normally sees that instance of year. So while revenues should fall about 14 percent that quarter from the same period a year earlier, the return to normal seasonal patterns is significant.

“We saw a number of positive signs that quarter in the economy and in our business,” said Chambers. whether that continues for a few more quarters, he said, “we believe there is a good chance we will look back and see that the tipping point occurred in our business” during the fourth quarter.

Investors weren’t thrilled with the results. Shares of Cisco fell 3.3 percent in extended trading, after falling 29 percent, or 1.3 percent, to 22.15 on Aug. 5. The report contributed to the mixed messages that Wall Street has been getting from tech’s biggest suppliers. After upbeat reports from Apple and Intel in July, Microsoft turned in a dreary fiscal fourth-quarter report on July 23.

Lower Profit Margins Ahead?

Chambers’ “message was that ‘We’re at the new normal,’ ” says Sam Wilson, an analyst with JMP Securities.

Chambers pointed to increased orders for Cisco gear as evidence that demand is strengthening. While order rates in the past two quarters were 10 percent to 15 percent below seasonal norms, “we’ve seen a dramatic difference” in recent weeks,…

[Source] dhiram