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Cisco Profits Down, But IT Spending May Be Improving

Cisco on Wednesday reported a drop in profit greater than 46% in the fiscal fourth quarter, as businesses continued to withhold spending on the company's networking equipment.

Cisco reported net income for the quarter ended July 25 fell to $1.1 billion, or 19 cents a share, from $2 billion, or 33 cents a share, the same period a year ago. Revenue dropped 17.6% to $8.5 billion from $10.4 billion.

Nevertheless, Cisco, which is a bellwether for enterprise IT spending, said it saw signs during the quarter that businesses may be starting to open their wallets.

"We saw a number of positive signs this quarter in the economy and in our business, especially comparing our sequential quarter-over-quarter order trends," John Chambers, chairman and chief executive for Cisco, said in a statement. "If we continue to see these positive order trends for the next one to two quarters, we believe there is a good chance we will look back and see that the tipping point occurred in our business in Q4."

Businesses have lagged behind consumers in technology spending, making recovery from the economic recession for business-dependent companies like Cisco more difficult. Cisco in July laid off 600 to 700 employees from its San Jose, Calif., headquarters, as part of an ongoing restructuring of its operations to reduce costs.

While maintaining its focus on business, Cisco also has been diversifying its product portfolio with consumer-centric technology, particularly home networking and storage for music and video. In March, for example, Cisco said it would buy Pure Digital Technologies and its easy-to-use Flip video camera for $590 million in stock.

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