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To: Maverick who wrote (456)	11/5/1997 7:43:00 PM
From: Maverick	Respond to of 1629

CSCO's CC Chief executive officer John Chambers was upbeat on the first-quarter results, saying the company was pleased with a book-to-bill rate above 1 and steady orders throughout the quarter. However, Asian economic weakness continues to haunt Cisco, adding some near-term uncertainty to the company's outlook. Gross margin was flat with the fourth-quarter at 65.1 percent. However, Chambers said he expects gross margin to decline gradually in the future, as Cisco's dominance in the industry may affect its ability to match industry growth rates. Chambers addressed recent anxiety about the effects of service provider consolidation, saying he doesn't foresee market saturation. Chambers told analysts that while he expects consolidation to accelerate, it won't threaten Cisco, which saw improvement in service provider activity in the first quarter. Furthermore, Chambers said, a host of new startup service providers are emerging, expanding the market. Chambers said Cisco's strengths during the quarter were additional market share gains in local area network switching, and expansion of its alliance strategy. Cisco's goals going forward are to grow revenue at or above industry growth rates and improve inventory management. Days Sales Outstanding decreased to 56 days from 60 during the quarter. Chief financial officer Larry Carter projected operating expenses may increase faster than sales in the second quarter, as the company steps up its investment in R&D and sales hiring. Continuing concerns for the second quarter, according to Chambers, include economic instability in Asia, service provider spending, and competition. Chambers said Asia continues to be "economically challenging," as the region's contribution to Cisco sales fell to 12 percent from a range of 12 to 16 percent. Japan and Korea exhibited the slowest growth, while Chambers said the company is still well-positioned in China, Hong Kong and Taiwan. Chambers admitted concern over whether service providers would continue spending at current levels, but chalked it up to the company's "normal paranoia." Chambers said the company responded to aggressive pricing in the first quarter with its own cost cuts, but the company is cautious about its ability to grow at the industry rate of 30 to 50 percent in the face of new competition.