Cisco Says Y2K Won’t Stop Spending

Cisco Systems, Inc. has signaled the worldwide high-tech community that Y2K might not be the menacing profit-killer that many gloom and doomers have been predicting

The San Jose, California-based maker of network hardware also reported record earnings, a two for one stock split — and announced a $39 million (US$) investment in a company that tracks customer’s bills and purchases over the Internet. Cisco’s chief executive officer John Chambers told the Wall Street Journal that he was more optimistic about the possible effect the Y2K problem would have on corporate spending for the rest of the year. “Most customers are just going to continue at their normal pace,” Chambers said. If Chambers is right, this is good news for software giants like SAP, Oracle and Microsoft. But analysts caution there has already been a slow down by some companies in purchasing expensive “enterprise programs” in favor of sandbagging revenue for potential Y2K glitches. Meanwhile, good news came pouring out of Cisco’s quarterly report including a profit spike of 33 percent, or $162 million — and even a 2-for-1 stock split payable June 21 to shareholders of record. Cisco’s report also revealed that it has captured 68 percent of the router business, 20 percent of remote access devices and 33 percent of all switching devices being used. Branching Out In an unrelated, but interesting move, Cisco announced that it will pump $39 million into Cupertino, California-based Portal Software, Inc. The company specializes in software that can be used to track e-commerce customers’ purchases over the Internet. Analysts say this is further evidence that Cisco plans to generate more revenue by enhancing e-commerce offerings for its existing ISP customer base. Cisco has also announced that it had joined a consortium including AT&T, AristaSoft Corp. and Compaq Computer Corp. that would create guidelines for the fast-emerging application service providers. These relatively new businesses lease expensive enterprise software to companies over the Internet — rather than sell it. Some analysts say this is Cisco’s way of hedging all of its bets.

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