By Rochelle Garner Feb. 4 (Bloomberg) — Cisco Systems Inc. , the biggest maker of networking equipment, predicted accelerating sales growth and said it will boost its workforce by as much as 3,000 as customers resume spending to deal with surging data traffic. Third-quarter revenue will rise 23 percent to 26 percent from a year earlier, the company said yesterday. That means sales will be at least $10 billion, topping the $9.49 billion average estimate of analysts in a Bloomberg survey. Chief Executive Officer John Chambers , citing stronger sales in every customer segment and almost every region, said the global economy has entered a new phase of recovery. The San Jose, California-based company is a bellwether for technology spending because it dominates the market for routers and switches, which direct Internet traffic. “Almost every country is saying their momentum is better than it was before, and almost every business is saying it’s more optimistic,” Chambers, 60, said in an interview. “It shows a capital spending trend that’s hard to deny, on a global basis.” Cisco will hire 2,000 to 3,000 people in the next several quarters and plans to be “aggressive” with internal innovation and acquisitions, Chambers said on a conference call yesterday. Cisco rose 44 cents, or 1.9 percent, to $23.51 in Nasdaq Stock Market trading at 9:40 a.m. New York time. The shares advanced 47 percent last year. Second-quarter earnings , excluding costs such as stock- based compensation, rose to 40 cents a share, the company said yesterday. Analysts had estimated 35 cents on average. Sales increased for the first time in a year. ‘Macro Recovery’ “It probably was about as good a quarter as people could have hoped for,” said John Marchetti , an analyst with Cowen & Co. in New York. He has an “outperform” rating on the shares, which he doesn’t own. “Investors wanted to see multiple areas of Cisco’s business benefit from the macro recovery. This was the first quarter since the recession began where I think you can say that.” Second-quarter net income rose 23 percent to $1.85 billion, or 32 cents a share, from $1.5 billion, or 26 cents, a year earlier. Sales climbed 8 percent to $9.82 billion in the period, which ended Jan. 23. Analysts had predicted $9.41 billion. As the economy rebounds, Chambers aims to make more acquisitions. The company bought Starent Networks Corp. for about $2.9 billion last quarter, gaining gear that wireless carriers use to help route mobile traffic. More Deals? Cisco ended the second quarter with $39.6 billion in cash , up from $35 billion at the end of fiscal 2009. “This highlights Cisco’s ability to execute through the economic cycle,” said Joel Levington , director of corporate credit at Brookfield Investment Management Inc. in New York. “Cisco’s balance sheet remains pristine, setting the stage for additional acquisitions.” Global data traffic probably will more than double every year through 2013, according to Cisco. The company aims to add technologies such as videoconferencing that boost Internet traffic, increasing demand for its routers and switches. In January, Goldman Sachs Group Inc. forecast worldwide spending on technology products will rise 5 percent this year, fueled mostly by countries in emerging markets. Technology spending in the U.S., Western Europe and Japan will advance 2 percent, Goldman Sachs estimated. “While we believe the recovery is now occurring, no one knows for sure how strong it will be, how long it will last or the extent of new-job creation,” Chambers told analysts yesterday. “We are going to continue to be very aggressive to position ourselves for an optimistic view of global economic growth.” To contact the reporter on this story: Rochelle Garner in San Francisco at rgarner4@bloomberg.net
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Cisco May Hire 3,000 as Customers Increase Spending on Network Equipment
