Strong Tech Earnings Suggest Sector Is Getting Its Mojo Back

Even as the broader markets have plunged this week, hints of economic recovery are beginning to show in the technology sector if recent earnings are anything to go by. Cisco Systems (CSCO) CEO John Chambers was particularly enthusiastic about the networking-gear company's fiscal second quarter 2010 performance, ending Jan. 23. During that time, revenue climbed to $9.8 billion -- up 8% from the year-ago quarter -- a feat that Chambers called "one of the most robust, positive turnarounds I've every seen in my career" and "a tipping point toward the "second phase of a capital spending recovery."Chambers feels so confident that he's planning to ramp up Cisco's workforce by another 2,000 to 3,000 people over the next few quarters. That's even as the company absorbs the cohort of 2,100 employees it picked up from its recent acquisitions of Tandberg ASA, Pure Digital Technologies and China's DVN Holdings Ltd.

Cisco 'Being Very Aggressive'

"While no one knows for sure the strength of the recovery, job creation opportunities and the possibility of another downturn, we will continue to set our strategy and execute being very aggressive in both our investments and continued expansion," Chambers said, during the company's latest earnings call on Wednesday.

Cisco's recovery is broad-based, in both geographic and market segment term. But it's also reflective of a bigger picture improvement in the U.S., where spending on software and equipment rose at an annual rate of 13.3% during the fourth quarter of 2009, according to commerce department figures.

Chip maker, Broadcom Corp (BRCM) also reported a turnaround, with better-than-expected holiday sales and strong demand in Asia helping the company post a fourth quarter profit after sustaining deep losses during the same time just a year earlier.

Other Techs Also Deliver

Several Broadcom product lines, including its chips for broadband cable modems and enterprise networking equipment performed better than expected, said Broadcom CFO Eric Brandt, during that Wednesday earnings call call.

Akamai Technologies Inc. (AKAM), which helps companies like Apple (AAPL) and News Corp. (NWS) deliver online video, also reported a strong fourth quarter with revenue rising 12% to $238.3 million from $212.6 million in the year-ago period. Along with Cisco, which helps company's handle the data-heavy loads generated by digital video, Akamai is well-positioned to make even further gains as video sharing grows in 2010.

Of course, given the shaky condition of global markets, even Cisco's upbeat CEO, Chambers, hedged his bets, urging investors not to alter their forecasting models for Cisco too much with the market's gyrations: "We can see economic growth bounce up and down over the next 12 months," he said, adding Cisco would focus only on what it can control.
Read Full Story