Cisco Delivers Message of Hope, in Measured Tones

Despite taking a profit hit, there were still positives in Cisco's (CSCO) fourth-quarter results, released after market close Wednesday, potentially offering upside to investors.

With the tech sector eagerly awaiting good news about an IT turnaround, Cisco CEO John Chambers struck a cautious tone during a conference call late Wednesday, refusing to call a recovery.

Cisco's revenue and earnings beat, as well as a marked improvement in sequential order trends, however, impressed at least one analyst.

"Cisco sounded more optimistic regarding the potential upturn," wrote William Choi, an analyst at Jefferies & Company, in a note released Wednesday. "We also expect Cisco to benefit from several new product cycles."

The networking giant, which competes with Hewlett-Packard (HPQ), IBM (IBM) and Juniper (JNPR), has undertaken a major cost-cutting effort in recent months but is now switching gears.

"We're now moving the entire focus of the company to growth," said Chambers, hinting that the firm will branch out into new areas. "We will continue to move into additional market adjacencies, and we're currently at thirty."

A good example of Cisco's ongoing metamorphosis is its move into video through the recent acquisition of Pure Digital, maker of the Flip camera.

"Our consumer Flip momentum continues to be extremely positive," said the CEO during Wednesday's conference call. "We even have [started] expanding into the enterprise marketplace, where we got our first million-dollar commitment for Flips from a single enterprise customer."

Chambers also reiterated Cisco's commitment to "Smart Grids," networking infrastructure aimed at the energy sector, and "Smart Connected Communities," a clear attempt to tap into government stimulus funds. Another target area is small- to medium-sized businesses, which are expected to spend $7 billion on networking gear in 2010, he added.