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To: Mark Fowler who wrote (116356)	1/28/2001 2:53:26 PM
From: H James Morris	Read Replies (3) \| Respond to of 164684

Mark, the next few months will be interesting. >January 28 2001 18:30GMT \| Last Updated: January 28 2001 18:55GMT John Chambers, chief executive of Cisco Systems, warned investors on Sunday to take a more "conservative" view of the company's outlook for the next six months, as the US "market is slowing down much faster than people realise". But he said the downturn in the US economy was likely to last only two quarters, as the prospect of a tax cut planned by President George W. Bush and the impact of the Federal Reserve's rate cut earlier this month meant he was "very optimistic for the second half". Cisco, which builds communications infrastructure for companies and governments worldwide, is often seen as one of the most sensitive barometers of the economy. The company's electronic account management systems means it can calculate sales, orders and earnings at the close of business each day. The company, which was one of the first businesses to warn last year that the economy was cooling, cautioned just three weeks ago that Cisco was not immune from the chill. on Sunday, Mr Chambers said things have slowed further since then: "January was a challenge for us. Our customers are struggling. Capital spending is down dramatically," he said. Analysts and investors should take a "wider range" in their revenues and earnings forecasts for the company, as the outlook for capital spending is highly uncertain. Some companies have cut capital spending by 100 per cent as chief executives have decided to put new spending on hold, while other businesses - notably in Europe - are pressing ahead with internet infrastructure investment, he said. Speaking at the World Economic Forum in Davos, Mr Chambers said: "Three weeks ago, we said things were challenging. This quarter, we have found things even more challenging than that." As a result, he said, he is encouraging investors to be "even more conservative". However, Mr Chambers said that he was more optimistic than ever about the long-term outlook for the information technology industry, forecasting 30-50 per cent growth per year for the communications infrastructure business over the next five years. He argued that building out IT infrastructure was critical to raising productivity and economic growth, so further investment in networking systems was "a matter for survival" for chief executives and government leaders. Further, he was confident that President Bush would push through a retroactive tax cut which would be a much-needed stimulus, bolstering consumer confidence. However, the short-term outlook is less encouraging: "We just do not know how rough, rough is going to be," he said. Cisco will announce its quarterly figures on February 6. Anecdotal evidence from customers who had been telling him just before Christmas that business had "fallen off a cliff" or "someone just switched out the light" meant Mr Chambers had warned members of the incoming Bush administration that the downturn in the US economy was more severe than initially appreciated and the need for a tax cut greater than previously thought.