Byline: Cynthia L. Webb

"Cautious optimism" is back in vogue. Cisco Systems chief John Chambers is not ready to call it an outright recovery for the technology sector, but he does think that IT spending will grow next year.

"The trend is improving," Chambers said yesterday at Cisco's annual analyst's meeting , which continues through today. "This year is about growth," the San Jose Mercury News quoted him as saying. * The San Jose Mercury News: Cisco Sees Improving Trend On Spending

Dow Jones Newswires reported that Chambers "said business confidence is improving. The trend began globally in April with the exception of Asia, and has continued, with Asia getting into the act over the summer. 'Both business and government leaders understand the correlation between productivity and GDP growth,' Mr. Chambers said. 'Infrastructure build-outs will position countries and businesses for growth in the future.'" * Dow Jones Newswires via The Wall Street Journal: Cisco's Chambers Sees Signs Tech Budgets Are Growing (Subscription required)

But don't bet on another tech boom just yet. "We are seeing the customers in the enterprise (sector) start to budget for the first time in several years slightly up," Chambers said, according to Reuters. "That's often in the low to mid-single digit numbers for (capital spending)." * Reuters: Cisco Customers Increasing Spending -- CEO * Webcast information for Cisco analyst meeting

For Cisco at Least, Good Times on the Horizon

Cisco remains a bellwether for the tech economy overall, and it appears the networking hardware company has successfully weathered the worst of the downturn. Last month, it logged its first quarter of revenue improvement in three years. "The company is expecting renewed spending by its telecommunications provider customers and is targeting Internet service providers as one area of potential growth. But Cisco's six emerging businesses -- security, the networked home, Internet protocol telephony, optical networking, wireless and storage -- are expected to become the focus of future growth. Chambers said that each of these areas has the potential to become a $1 billion business," The Merc reported.

CNET's News.com had more details on where Chambers thinks IT spending growth will emerge: "Of particular interest to these companies are data storage systems equipment, security, and personal computers, Chambers said. Internet phones, which route calls over the Internet to save on telephone fees, is another factor increasing spending." * CNET's News.com: Cisco Chief Says IT Spending Will Rise

More from Reuters on the importance of Cisco's take on IT spending: "Investors tend to see Cisco, the world's largest maker of gear that directs Internet traffic, as a benchmark for corporate and government spending because about 75 percent to 80 percent of its sales come from those customers. Cisco said last month that sales in its current quarter, its fiscal second, would rise as much as 3 percent from the previous quarter."

Shares of Cisco traded up yesterday on the news 55 cents to close at $23.78 on a day that was not a stellar one for the market overall. At Cisco's analyst meeting yesterday, The San Francisco Chronicle noted, "offered no change to the San Jose company's previous financial forecast, [but] provided confirmation to many investors that Cisco has emerged from the three-year downturn in tech spending stronger than ever. ... Wall Street expectations for double-digit annual revenue growth come even though Cisco's sales fell more than 7 percent annually for the two years ended in July, a period in which it gained market share against rivals in the market for service-provider gear." * The San Francisco Chronicle: Cisco Systems Thriving

Cisco also used yesterday's meeting to announce an upgrade to routers for its telecom firm customers -- not a surprise considering that it is one of the growth industries targeted by Chambers in his remarks. The high-end router upgrades are "designed to be more cost effective and simpler to install," The San Jose Mercury News reported. * The San Jose Mercury News: Cisco's New Router Upgrades Aimed For Telecom Companies

Intel's New Bag of Chips

Intel , another much-watched tech biggie, was also making waves yesterday, announcing that it is rolling its wireless unit into its networking group. The move comes "less than a week after announcing a $600 million write-off in the company's wireless chip business," The Wall Street Journal reported. (It also comes a day after Hewlett-Packard said it was consolidating its services and enterprise units to better serve its customers.)

The Journal said that "Intel's communications group, which makes chips for networking devices, will absorb the separate wireless communications and computing group, which mainly supplies chips for cellular phones. Sean Maloney , the 46-year-old executive vice president who had been running the networking business, will run the combined operations. Senior Vice President Ron Smith , 53, who had run the wireless unit, will retire from Intel early next year."