Investors and economists alike will be watching


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fourth-quarter earnings Tuesday for an update on the elusive tech spending recovery.

Collective Wall Street wisdom says the computer networking giant will beat profit estimates by its customary penny and offer a restrained yet rosy outlook on sales trends. An as-expected quarter by the big network gearmaker could go a long way toward easing the slowdown fears that hammered the market last week.

Cisco has been on a bit of an upswing, continuing to collect strong profits while diversifying beyond its core business of selling Internet traffic-sorting devices called routers. Even so, some observers think the communications industry hasn't fully recovered from the tech bubble of the turn of the century. They warn that signs of softness could yet creep into Cisco's numbers.

"I still think it will get worse before it gets better," says John Lynch of Asset Recovery Center, a network equipment salvage company in Milford, Conn. "Look at telecom. It's not doing so well. Companies are still downsizing."

On Friday, Cisco fell 68 cents to $19.93, putting it some 30% below its 52-week high.

Boom-Era Holdover

Wall Street's fascination with Cisco's numbers is a tribute to the company's history of robust performance. The company's long dominance of the Internet infrastructure market has earned it oracle status when it comes to tech trends -- despite Cisco's famously

poor predicting record going into the bust.

Though the days of hyper growth are over, Cisco has been able to manage costs, preserve wide margins and juggle businesses well enough to regain consistency in its financial results. Cisco's return to predictability has given the investment community some comfort.

Analysts say they aren't bracing for any big surprises, good or bad. Most, like Oppenheimer's Bill Becklean, are expecting something like a continuation of the last quarter's steady progress.

"The world's certainly not friendly right now, but I don't expect them to back off from their cautious optimism," says Becklean, who rates Cisco a buy. Oppenheimer has no underwriting ties to Cisco. "The purse strings are starting to loosen a little," says Becklean, referring to corporate information technology spending.

But the Street's consensus is only one view, and not everyone is comfortable with it.

Lynch of Asset Recovery Center finds it hard to reconcile Cisco's optimism with the entirely different perspective he has as one of the industry's cleanup guys. Lynch says he's still mopping up truckloads of surplus network gear years after the spending collapse.

"We're still taking equipment out. It's not getting better," says Lynch, who was in Germany last week removing servers and Cisco gear from an AOL Netscape facility.

"I don't think they are doing as well as people think they are," says Lynch of Cisco's modestly improving confidence in a gradual return of global tech spending.


Even so, Cisco's put a bit more money behind its rosy pronouncements in recent months. The San Jose, Calif., tech titan hired 200 new employees in the first three months of the year, ending a two-year hiring freeze. Cisco said in May that it expects to hire an additional 1,000 people by year-end.

For the company's fiscal fourth quarter ended in July, analysts are looking for a per-share profit of 20 cents on $5.9 billion in sales. That would amount to sequential top-line growth of 5%, on the high side of company guidance.

For the fiscal first quarter ending in October, analysts expect top-line growth of 2%, according to Thomson First Call.

"The macro picture hasn't been great, and that could cause some cautiousness in their outlook," says A.G. Edwards analyst Greg Teets, who rates Cisco a buy.

But Teets likes how equipment buying trends favor outfits like Cisco and rival


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, which make Internet routers that help companies manage growing network traffic levels.

"The economic growth isn't as strong as we or Cisco would like, but there's a strong transition to IP technology that helps them in this market," says Teets.