“For the first time in a very long time, I believe the internal and external factors are continuing … to be more positive. We are slowly seeing increasing, very-cautious business optimism in capital expenditures.” – Cisco CEO John Chambers.The high-tech industry is coming out of the doldrums, with communications giant Cisco leading the way.

Cisco Systems beat Wall Street’s estimates when it announced late Wednesday that sales and earnings both increased for the first quarter of 2004, giving hope to investors that corporate technology spending is on the rise.

Earnings of 17 cents a share beat estimates by two cents, and revenues of $5.1 billion topped $4.85 billion forecasts. They also marked a 5.3 percent increase over the same period a year ago, when Cisco reported sales of $4.85 billion, or 15 cents per share.

For the three months ended Oct. 25, Cisco earned $1.09 billion, or 15 cents per share, compared with a profit of $618 million, or 8 cents per share, for the same period last year.

Cisco, based in San Jose but with a large operation in RTP, said net income rose to $1.1 billion, or 15 cents a share, in its fiscal first quarter ended Oct. 25, from $618 million, or 8 cents a share, a year earlier.

“Recovery appears to be slowly gaining momentum but is still fragile in the minds of our customers,” John Chambers, chief executive officer of Cisco, said Wednesday during a conference call to discuss the company’s first quarter fiscal 2004 financial results.

Chambers pointed to strength in Cisco’s core routing and switching technologies and better-than-expected growth in its service provider business as signs of a recovery starting to show signs.

“We are continuing to see a number of signs that could be interpreted with the appropriate caveats as optimistic,” Chambers said.

2nd quarter numbers grow

Cisco’s chief financial officer, Dennis Powell, said in the conference call that current-quarter revenues are also expected to rise 1-3 percent, as much as $5.25 billion, which would be higher than current analyst expectations.

Shares of Cisco (Nasdaq: CSCO), which closed the day up 22 cents to $21.80, jumped 5 percent, or $1.03, to $22.93 in after-hours trading following the results.

The strong results from Cisco, taken together with sales gains at other telecommunications equipment vendors such as Lucent and Nortel, point to a recovery for the sector, said Barry Jaruzelski, lead partner in Booz Allen Hamilton’s electronics practice.

“This is the most compelling proof-point that this quarter represents the turning point for telecommunications and data communications infrastructure,” Jaruzelski told Reuters.

As late as August, Cisco, the leading maker of routers and switches through which Internet and other network traffic pass, said that demand for its products remained weak.

“The business and technology strategies we put in place 18 to 36 months ago are showing tangible momentum,” said Chambers. “I am confident our strategies and strong execution throughout the downturn have positioned us well for future growth.”

Right direction

In the router space, Cisco signed a significant deal with Verizon as orders from U.S. carriers rose 10 percent over the previous quarter. Enterprises, including the retail and financial services segments, and government contracts, particularly in education and security, were also encouraging, Chambers said.

Linksys, the home network equipment maker Cisco bought for $500 million this year, posted $119 million in revenue, in-line with company expectations. Home networking is a growth areas Cisco is investing in, along with IP telephony, optical, wireless, security and storage products.

Most performed well, Chambers said, but he was disappointed with Cisco’s storage area networking unit, which saw slower than expected growth because of manufacturing issues and longer sales cycles.

Rachna Ahlawat, a principal analyst with Gartner, said Cisco’s numbers are moving in the right direction.

“It is too early to say that the market is rebounding,” Ahlawat told InternetNews.com. “We have to see a couple of more quarters like this, not just from the leader, but other players as well.”

Cisco Systems: www.ciscosystems.com