Cisco's Job ShockerCynthia L. Webb
Byline: Cynthia L. Webb
Silicon Valley, prepare for an earthquake.
No, the San Andreas fault isn't about to slip again. But Cisco Systems 's announcement yesterday that it plans to hire 1,000 more workers is sure to bring throngs of out-of-work technology workers streaming into the city hoping that the company's expansion, coupled with Google 's IPO, signals that the boom is officially on again.
Cisco's hiring spree "would represent the biggest surge in its workforce since the Internet boom," The San Jose Mercury News noted. The company already "added 214 employees during the most recent quarter, its first increase in workers in three years," the newspaper noted. CEO John Chambers insisted that "the new hiring would be selective -- in areas such as 'new technologies' and 'new opportunities in existing marketplaces.' He cited businesses such as computer security, video technology, data centers and Internet-based phone technology as likely candidates for more jobs." * The San Jose Mercury News: Cisco To Add 1,000 Jobs (Registration required)
The San Francisco Chronicle reported that "[t]o analysts, the decision to start hiring in significant numbers underscores the company's confidence. 'If he's going to add that many, you can bet he feels pretty good about their momentum,' said analyst Aalok Shah at Pacific Crest Securities ." * The San Francisco Chronicle: Cisco Posts Record Profit
The hiring news was announced late yesterday in tandem with the company's glowing third-quarter earnings report , which offered more hints that the tech economy is on the mend. "Most of our customer CEOs are beginning to be more optimistic not only about the economy, but also about their own industries and companies," Chambers said in a conference call yesterday, quoted by The San Jose Mercury News. More Chamber-isms, quoted in The Los Angeles Times: "'CEOs are becoming more optimistic about the economic direction and their own companies,' Chambers said. In turn, he said, 'I continue to be more optimistic than I was going into the last quarter.'" * The Los Angeles Times: Cisco's Earnings Up 23% As Sales Surge (Registration required)
The Merc noted Cisco's "quarterly profit rose 23 percent and sales jumped 22 percent over a year earlier as businesses spent more to upgrade technology. The results provided further evidence that tech spending has emerged from the economic downturn." The Financial Times struck a similar chord, saying Cisco's results "provided further evidence of a recovery in technology spending by announcing third quarter revenues and earnings ahead of Wall Street expectations." * The Financial Times: Cisco Creates 1,000 Jobs As Spending Recovers
The Wall Street Journal reported that Cisco's latest earnings mark "a sharp contrast to cautious comments made three months ago regarding demand for computer-networking equipment. Cisco, which tends to play down its own prospects, said it expects continued strong revenue growth in the current quarter, which ends July 31." And as for any Cisco naysayer worried with the company's newfound bullish approach, Chambers had this to say in an interview with the Journal: "We wouldn't be hiring if we didn't think the business opportunity outweighs the risks." * The Wall Street Journal: Cisco's Earnings, Revenue Climb as Demand Rebounds (Subscription required)
No Irrational Exuberance Here
Like other CEOs at tech heavyweight firms, including Craig Barrett at Intel and Sam Palmisano at IBM , Chambers "warned that though companies are loosening their purse strings and making investments in network improvements, there's a risk that global instability, rising interest rates, the volatile stock market could lead to more cautious spending," The Associated Press reported. Cisco "was hit hard by the tech downturn that started in late 2001, but mostly stayed profitable through aggressive cost cutting as well as capturing additional market share even though demand for new gear was shrinking. The company also has branched into other areas, including Internet telephony, storage, wireless networking and security." * The Associated Press via washingtonpost.com: Cisco Reports Strong 3rd-Quarter Results (Registration required)
More on the reasons for Cisco's cautious optimism: "Chambers tried Tuesday to keep expectations from outrunning what is still a slow recovery. Sales should grow another 3 to 5 percent in this quarter, he said -- hardly breakneck speed. But orders from Cisco's main customers -- large corporations, or enterprises -- are finally rising after several dismal or sluggish years. 'This is the first major growth, adjusted for seasonality, that we've seen in U.S. enterprise in a very long time,' Chambers said," The San Francisco Chronicle reported. The Financial Times said "Chambers' comments are likely to reassure investors that demand for information technology products such as computers and networking equipment remains on track for a modest recovery this year."
While tech stocks traded up yesterday before Cisco's numbers were released, Wall Street indicated this morning that it is going to play hardball with the company. "Shares of Cisco Systems Inc. slipped 1.2 percent in pre-market trading on Wednesday on inventory concerns and mild disappointment with the company's outlook for its current quarter," Reuters reported. Cisco " shares fell 50 cents to $21.75 in after-hours trading on the news, released after the stock market's close. Cisco shares have dropped 10% since early April," USA Today said. "Some investors still expect booming growth from tech companies, and Cisco is too mature to deliver it, says CIBC World Markets analyst Steve Kamman ." * Reuters: Cisco Slips In Pre-Open Trading * USA Today: Cisco Plans To Add 1,000 Workers, Most In USA
CIBC's Kamman was also quoted by The New York Times, which reported that the analyst "said one reason investors might be feeling unenthusiastic about Cisco, despite its solid quarter, was that they continued to long for the higher-flying days of the dot-com boom. If investors 'think we're going back to 2000 or 2001, they'll be sorely disappointed until reality sets in,' Mr. Kamman said. "Too many people are saying there's no growth here, but this is about a company consolidating its hold on a market.'" * The New York Times: Cisco Profit For Quarter Slightly Beats Estimates (Registration required)
(Sure enough, Cisco's shares opened down this morning .)
Let The Games Begin Sony , Nintendo and Microsoft are already touting their latest-and-greatest gaming developments at the start of the E3 gaming expo . But this year's game industry gathering isn't matching up to past years, according to Washington Post reporter Mike Musgrove
In a piece today, Musgrove wrote: "Unlike in previous installments of the Electronic Entertainment Expo (E3 for short), the industry's annual trade show here, none of these big-three firms made sweeping announcements about plans for new, high-powered game consoles. The one new category of hardware shown off at the show will not sit under a television set, but it will fit handily inside a backpack. Nintendo unveiled the Nintendo DS, a successor to its nearly ubiquitous GameBoy Advance handheld. And Sony showed off the PSP, a portable PlayStation that represents its first move into a market that has long been defined by Nintendo -- and has defeated many other would-be competitors. The two handhelds show different philosophies about what customers are supposed to want. Nintendo is a game company that sticks to the games; Sony, on the other hand, is a consumer electronics and entertainment juggernaut that can think of many ways to make money off a gaming device besides just games." * The Washington Post: Game Firms Think Small (Registration required)
The San Francisco Chronicle said that "[w[hether these devices live up to that billing won't be known anytime soon -- the earliest consumers can get their hands on them is the end of this year or early 2005. However, the new portables could prove to be a much-needed tonic for an industry that will probably see slowing sales in the next couple of years as it prepares to move into the next generation of game consoles." * The San Francisco Chronicle: Gaming On A Small Scale
Gamers, Cool Your Heels
Video game fans will have to wait awhile to get their hands on either the PSP or Nintendo's DS. The "companies showed prototypes but gave no pricing information and few details about what games would be available at launch. Nintendo expects to debut the DS in the United States by the end of the year; Sony said its PSP will go on sale next spring," The Seattle Times reported. USA Today has a good photo of the DS, while the tech gadget site Gizmodo.com has a close-up of both the PSP and the DS . * The Seattle Times: Gamers, Start Your Handhelds
Price Wars, Anyone?
Sony also unveiled a tried-and-true price-cutting strategy at E3. Sony is "cutting the price on its popular PlayStation 2 video-game console to $149. The markdown, from $179, matches a move by Microsoft last month to sell its Xbox console for $149. But Sony's main target Tuesday was Nintendo. The rivals used the video-game industry trade show, known as E3, to unveil new portable gaming devices. Sony said that nearly 100 game publishers and developers have begun creating games for Sony's PlayStation Portable, which will launch in Japan in the fall and in the U.S. and European markets next spring," The San Jose Mercury News reported. * The San Jose Mercury News: Gaming Battle Heats Up At Expo (Registration required)
"Industry analysts had suggested that if Sony did not lower the price on its PS2 in order to spur sales, U.S. game software makers, many of whom track Sony's fiscal year, might find sales growth targets harder to reach," Reuters said. "Late in April, Sony forecast that PS2 sales in the business year ending March 2005 would fall by as much as 30%, a much sharper decline than analysts had expected." * Reuters via USA Today: Sony Cuts PlayStation 2 Price To $149 * The Seattle Post-Intelligencer: Video-Game Console Wars Getting Hotter
For more background on this year's E3 expo, see the Filters from Tuesday and last Friday .
Microsoft alerted Windows users to a new security hole yesterday, a vulnerability that "could allow hackers to take control of a PC by luring users to a malicious Web site and coaxing them into clicking on a link, the company warned on Tuesday. The world's largest software maker issued the warning as part of its monthly security bulletin, along with a patch to fix the problem," Reuters reported. Microsoft's security Web site has info. on the patch to fix this vulnerability, plus lots of other important security tips. * Reuters: Microsoft Warns of 'Important' Windows Flaw
Shoulda Gone to Law School...
Microsoft has been handed a $258 million bill from lawyers who worked on the price-fixing case that was settled in California, The Associated Press reported. "The bill comes as attorney fees are being examined critically by the American Bar Association and lawmakers across the country. It amounts to about $3,000 per hour for one lawyer, more than $2,000 an hour each for 34 other attorneys and $1,000 an hour for administrative work," the wire service reported. * The Associated Press via washingtonpost.com: Lawyers Seek $258M for Suing Microsoft (Registration required)
Who Needs Oracle?
Microsoft is firming up its already close ties to German software firm SAP . The two companies "agreed to integrate their high-profile efforts in Web software. The deal, which is to be announced at an SAP conference in New Orleans, is another indication of the success corporate customers are having in forcing software companies to eliminate technology roadblocks that have often served to entrench particular providers. The agreement includes provisions to link SAP's software, which is typically used for managing business functions such as manufacturing, supplies and financial reporting, with Microsoft's Office suite of desktop applications. SAP and Microsoft created a joint marketing fund and a technology support center in Germany and cross-licensed their patent portfolios," The Wall Street Journal reported. * The Wall Street Journal: Microsoft, SAP Form Alliance on Web Software (Subscription required)
CNET's News.com said the "deal, which calls for better links between Microsoft's .Net development software and SAP's NetWeaver integration server, could help big companies more easily tie their SAP business applications to Microsoft Office and other Windows-based software, Microsoft executives said." * CNET's News.com: Microsoft, SAP Get Closer On Web Services
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