Last orders at the telecoms bar: CFOs tighten the purse strings

NEWS There may be light at the end of the tunnel in the US economic downturn, but European reaction to Cisco's results confirm that the worst could yet be to come on this side of the pond. In a report entitled 'Last Orders', investment bank Goldman Sachs predicts a gloomy future for European telecom equipment providers in the light of their recent financial results. The report states: "We are especially focused on what operator CFOs might do to capex (capital expenditure) budgets in September after the summer holidays. Our caution on Europe was reinforced by Cisco's comments on its Q4 conference call." Speaking on Tuesday at Cisco's end of year results presentation, CEO John Chambers said: "There are some signs of stability, but Asia and Europe may get worse before they get better, and this could have a negative impact in the US and cause a second round of economic challenges." He claimed orders were down across Europe on a segment by segment basis. "The exceptions so far have been the Nordics, Middle East and southern Europe and when the economy picks up CFOs are going to start opening their purse strings." However, Europe's IT spend momentum is up to three months behind the US, he said. But Goldman Sachs predicted that things would pick up by the first half of next year.