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Tech Spending Bounces Back as Profits Rise

By The Wall Street Journal

February 4, 2010

Business spending on technology goods and services is returning as the economy mends, pumping new life into suppliers such as Cisco Systems Inc., though it has been slower to reach other sectors.

The big maker of networking gear Wednesday posted a 23% jump in quarterly profit and 8% gain in revenue, its first such increases in a year.

The economy has entered a new "phase of the recovery," said John Chambers, Cisco's chief executive, in a call with analysts, adding that he planned to hire up to 3,000 workers in coming quarters. "This is one of the most robust positive turnarounds I've seen in my career," he added.

Cisco's results add to a growing body of evidence that companies are starting to open their wallets after the recession. The Commerce Department last week said business spending on equipment and software rose at a 13.3% annual rate in the fourth quarter, adjusting for inflation. That was the fastest growth since early 2006.

 Still, spending was 18.5% below the level it reached in late 2007. Just to keep pace with depreciation, economists reckon companies will need to continue raising capital-spending levels in the quarters to come.

From The Wall Street Journal
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