December 10, 2003 12:04 PM PST

Cisco chief says IT spending will rise

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Cisco Systems chief executive John Chambers on Wednesday gave an upbeat assessment of information technology spending next year, saying Cisco customers are "beginning to get their foot off the brake."

"For the first times in years," major telephone companies and tens of thousands of corporations that do business with Cisco are increasing their capital expense budgets in 2004 in the "low single-digit percentage," Chambers told the financial community attending the Cisco Systems Worldwide Analyst Conference 2003.

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Cisco Systems Chief Executive John Chambers says major telephone companies and tens of thousands of corporations that do business with Cisco are increasing their capital expense budgets in 2004 in the "low single-digit percentage."

Bottom line:
As a leading provider of networking gear, Cisco?s outlook is widely seen as a good barometer of the state of that market, as well as of the entire tech industry.

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"A few (customers) are beginning to get their foot off the brake and are headed towards the gas pedal in terms of implementations," he said.

Of particular interest to these companies are data storage systems equipment, security, and personal computers, Chambers said. Internet phones, which route calls over the Internet to save on telephone fees, is another factor increasing spending. "If you had one hundred executives in a room, everybody would raise hands" if asked whether Internet telephone systems are in their future, Chambers said.

Spending will also increase because leading-edge companies, including retailers such as Albertson's, Wal-Mart Stores and Home Depot, are buying additional equipment in order to transform their current networks from "being an infrastructure to run the business into one that's really customer focused," Chambers said.

"They want to understand their customers from the point they walk into the store," he added. "The future store is starting to focus on that intently."

Chambers' upbeat view of the future is shared in some part by market analysts. Gartner analysts said they believe capital spending budgets will grow only at a modest pace of 1.6 percent next year, according to 600 IT executives that Gartner recently surveyed. IDC has a more optimistic view, predicting last week that IT spending will grow by 6 percent to 8 percent or more, revising its earlier forecast of 4.9 percent.

 

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