Cisco gets battered around the ring

NEWS Cisco might have reported its worst earnings in the company's history, but it's banking on its $18.5bn treasure chest to see it through the economic downturn. In a conference call to analysts, John Chambers, CEO of Cisco, said: "The cash will let us weather current economic conditions, give our customers peace of mind, and let us invest in new technologies and markets. "We have no long-term debt and we expect to continue to add to our positive cash flow," he added. Those sorts of cash reserves means the company is well positioned to go on the acquisition trail, said Tony Lock, senior analyst at Bloor Research. "The company has good technology, good skills, a huge brand name and with that much cash sitting in the bank, if any opportunities come along it can spend it to optimise on that and make a profit," he said. Chamber's six-point plan to turn the business around - originally announced in February -is also yielding results. The plan prioritises reducing headcount, re-aligning resources to the profitable areas of the business and pushing the internal use of internet-based applications for business processes as a way to treat the rot. Over $1bn of operational costs have been saved through measures such as introducing online learning and sales management. At one stage during the call, Chambers' boasted that over half of its Fortune 500 customers are evaluating adopting similar online schemes. But Pim Bilderbeck, senior analyst at IDC, remains unconvinced. "They are playing with the technology right now - not spending money on it. Everyone is concentrating on the bottom line. They want no frills and no thrills," he said. Since the start of the year, the networking giant has reduced its workforce by 4,962 to 38,099. Chambers also hinted that the company might be pulling out of certain markets, claiming the company will focus on product segments that generated the greatest or most sustainable profit margins and not markets that only offered "break even or slight profit". However, he refused to expand on which markets Cisco can abandon.