Cisco CEO John Chambers and strategy chief Ned Hooper address analysts. Photo: Jon Fortt.

Cisco has its swagger back.

When the networking provider hosted Wall Street analysts at its San Jose headquarters Tuesday for its annual update on the state of the business, the most striking thing was the full-scale return of confidence. After a year in which most of tech has struggled to regain its footing in a global financial crisis, CEO John Chambers and his lieutenants told the financial community that they’re poised to grow sales faster than big companies typically can.

To be specific, Chambers says that in normal economic times Cisco (CSCO) can deliver annual sales growth of 12-17%. Off of his current revenue base of $36 billion, that translates into a promise to find more than $4.3 billion in new revenue this year alone.

Chambers believes he can do it because a fresh set of Internet technologies is changing the way we communicate – and giving Cisco a chance to grab a greater share of the spoils. Chambers has outlined three opportunities he believes will reap big rewards: video, collaboration and virtualization.

In the simplest terms, Cisco is betting that video will continue to grow its share of overall Internet traffic as carriers use the Internet video to deliver movies and TV, businesses use it to help employees share ideas and close sales more quickly, and consumers use it to express themselves on the go.

All of that new video traffic should create demand for Cisco’s highly profitable networking gear. It should also create new openings for someone to sell communication systems, back-end servers and management software to run it – and Chambers is positioning Cisco to make that sale.

Skeptics point out that Cisco has stronger competition than ever. Hewlett-Packard (HPQ) and IBM (IBM) sell their own packages of virtualization technology. Microsoft (MSFT) and IBM have their own collaboration suites. Each has resources to rival Cisco’s – and it would be foolish to count any of them out.

So can Chambers deliver? More than a few analysts think he can. They point to Cisco’s cash hoard that’s approaching $40 billion, its track record for successful acquisitions, and its knack for spotting trends early enough to get a jump on rivals. He’ll probably need to use all those tools – and some new ones – to meet his own lofty growth targets.

Cisco’s growing again, and CEO John Chambers has called the beginning of a tech recovery. But don't assume this is the proverbial rising tide that's going to lift all boats.

First the good news: Cisco (CSCO) turned in a bang-up quarter. For the three months that ended on October 29, the seller of networking gear managed $9 billion in sales and 35 cents per share in profit, both of which outpaced even the most optimistic analyst expectations. Even better, Chambers said the current quarter will also shape up nicely – a promise that sent Cisco stock up a healthy 3% after hours.

But even in Cisco’s celebration, there were hints of caution. Though he signaled good results for this quarter, Chambers wasn’t willing to set sales and earnings targets for the rest of fiscal 2010, saying it’s too soon to assume that this recovery has legs. He asked analysts to maintain their ho-hum expectations for Cisco's financial performance, despite his apparent optimism – basically requesting that they keep the bar low, even though he feels more confident that he can clear it.

That’s the most important takeaway for anyone who might be tempted to read a full-blown tech recovery into Cisco’s good numbers. Yes, Cisco is doing well. For the entire tech sector to have a strong 2010 – and for Cisco to sustain its winning streak – we’ll need to see a convincing turnaround in fundamentals like U.S. unemployment and consumer spending. The jury’s still out on those, and will be until well after the receipts are in from the holiday shopping season.

Even Cisco's blowout quarterly results revealed signs that things are still rough out there. Not every customer group is bouncing back; governments awash with stimulus cash and enterprises that had postponed purchases proved to be big spenders during the quarter, but plenty of other key groups still looked weak.

For example, the phone and cable companies who buy Cisco routers spent nearly 10% less than a year ago. Retailers and other businesses also spent less. In Asia, non-government accounts remained soft. And orders in developing economies were down nearly 30% from last year.

In an interview after the earnings call, Cisco Chief Financial Officer Frank Calderoni told Fortune he feels very confident in Cisco’s ability to meet its financial targets, and said he was particularly encouraged by the rebound in enterprise spending; since it was among the first categories to suffer in the downturn, he's hopeful that its return signals a full recovery. But he's not letting himself get too worked up about it just yet. “Many outside of Cisco are seeing some challenges, talking about a mixed environment,” he said. “Because everybody’s not seeing improvement, we just want to focus on the current quarter where we have visibility.”

Translation: it’s still foggy, so Cisco is treading cautiously. Investors would be wise to do the same.

Is it time to dust off the party hats?

From the cheery headlines accompanying the latest round of tech earnings, you’d think so. Google (GOOG) CEO Eric Schmidt declared last week that, “the worst of the recession is behind us.” IBM (IBM) actually boosted earnings targets for the year. Taken along with the stimulus potential of Windows 7, Microsoft’s (MSFT) critically acclaimed PC operating system that launches this week, some say happy times are here again.

Not so fast. As we head into week two of this round of tech earnings, it’s important to keep in mind what these numbers show, and what they don’t.

What they show is this: we seem to have dodged the worst-case scenario. In those dark post-Lehman days at the beginning of the year it seemed the global economy was headed off a cliff, and nary a big tech CEO dared predict a recovery in 2009; as stock prices plunged and customers bolted, the sunniest forecast most would offer was carnage this year, followed perhaps by less carnage in 2010.

Now it’s a different story. Since the March market rebound and some calming statements from Fed Chairman Ben Bernanke, the suits have changed their tune. Intel not only reported a blowout quarter, but also pointed to a healthy holiday season; even embattled Advanced Micro Devices (AMD) said it expects a modest rise in sales. No one knows exactly what Apple (AAPL) will say when it reports earnings this week, but it probably involves an obscene volume of iPhones. In a turnabout from a year ago, all across Silicon Valley executives are whispering about an upbeat Q4.

So what’s not to like? Well, what these numbers don’t show is sustained revenue growth – the stuff that healthy earnings, stock prices, and economies are built on. IBM’s quarterly sales were down from a year ago, as were Intel’s. Other companies saw modest increases, but it’s too soon to tell whether the credit belongs more to a mounting recovery or to easier comparisons with last year – remember, things got bad right at the end of the third quarter, making these reports look impressive by comparison. Even the holiday season numbers won’t shed much light on whether this is a strong tech recovery or a weak one; last year’s Q4 numbers were so horrible that it won’t take much to blow them away.

No, to get a true read on the strength of this recovery, we’ll have to wait until April, when the big techs start reporting Q1 numbers. By then the euphoria of averted disaster will have worn off, and we’ll see if consumers and businesses have anything left to spend after the holiday season.

If sales slow down dramatically, we could be in for something like the uninspiring “L-shaped recovery” that Oracle (ORCL) CEO Larry Ellison predicted last month. If they continue chugging along despite high unemployment and foreclosures, then those party hats might be in order.

It's undeniably interesting to talk about the health of Steve Jobs. And whether Apple plays nice with the competition. Oh, and the multiple conflicts of interest between the boards of Apple (AAPL) and Google (GOOG), even after Eric Schmidt removed himself as an Apple director. (Genentech Chairman Art Levinson remains on both boards, and unless something has changed recently, Apple lead director and Steve Jobs confidante Bill Campbell is still Eric Schmidt's executive coach and a heavily involved advisor to Google's senior managers.)

This is all true, and truly worth jabber-jawing about. It also explains why there hasn't been all that much chit-chat about an astounding if unexciting report released earlier this week by the respected Sanford Bernstein analyst Toni Sacconaghi that details just how freaking profitable Apple is. The once-beaten company's ability to spew out cash may indeed be its neatest trick of all.

Some of Sacconaghi's points to consider:

* In the first half of 2009 Apple's iPhone accounted for only 8% of the cell-phone industry's handset revenues but 32% of its profits, Sacconaghi estimates. Its profitability blew everyone else away, 40% operating margins versus a 7.5% industry average.

* Similarly in PCs, Apple's meager 6% share of revenues translated into a quarter of all the industry's profits. Apple does this, the analyst surmises, by only going after the high end, designing gorgeous  products and benefiting from the integration of hardware and software.

* All by itself, Apple accounts for as much as 20% of worldwide purchase of NAND memory, the type of chips that go into the iPhone. Such dominance gives Apple a tremendous cost advantage.

For years Apple was a yes-but story. Yes, its Macintoshes were pretty and well loved by hipsters. But its market share was minuscule and therefore it was irrelevant. All of a sudden we see in the financial data that revenue market share is the wrong way to consider Apple. Its share is high where it counts, profitability, which translates into a market value of $148 billion.

Sacconaghi, by the way, used his report as an opportunity to up his price target on Apple's shares to $185.  At $165, the stock price had reached his previous target.

It seems Apple's various battles with competitors, the Federal Trade Commission, and even would-be partners will keep the company busy for months. None of these issues, however, will put a dent in the company's profitability in the near term.  For financial types, at least, that's a pretty sexy story.

Apple's iPhone will face slimmer margins in the near future.

Now that the dust has settled from Apple's iPhone 3GS announcement — video camera! compass! better battery life! — it's time to face facts. Though Apple (AAPL) still leads rivals in style and technology, it's not the breakaway frontrunner it once was. The new phone is cool and all, but now Apple is looking over its shoulder — and it will have to make some adjustments.

That's a big change from just a few weeks ago. Back then, the only credible competitors the iPhone faced were a sleek but boring BlackBerry line from Research in Motion (RIMM) and an exciting but chunky G1 from Google (GOOG).

Since then, however, the landscape has changed dramatically. Suddenly Palm (PALM) appears to have a potential hit with its new Pre, and Google is showing off slimmer second-generation (G2) Android phones. (I've used both the Pre and the G2, and they're pretty darn nice.) All of this new competition is good for consumers, but probably not for Apple's profit margins.

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Yahoo CEO Carol Bartz says she'll sell, but there's more to it than that. Photo: Yahoo

Yahoo CEO Carol Bartz, not one for mincing words, took the stage at the D7 conference in Carlsbad, Calif. on Wednesday and said yes, she is willing to sell Yahoo's (YHOO) search business or all of Yahoo – for "boatloads" or "big boatloads" of money, respectively.

As always, the tech press ate this up.  TechCrunch's Erick Schonfeld, a smart guy and a former colleague, called it "a softening of her public stance," since when she arrived in January she said Yahoo was not for sale. While he's technically right – she even said she had softened her position – I see something different in her comments.

I say Bartz still doesn't plan on selling Yahoo, or even the search business. Why? In reporting on Bartz for a recent feature in Fortune, I got a sense of how pragmatic she is. When Bartz arrived in January, she knew she had to announce that she was there to run the company, not to break it up and sell it, as a way of defining Wall Street's expectations. But Bartz is also a veteran executive who knows how this game is played. The truth is that in a well-managed public company, shareholders expect that everything will be for sale at a price. So her statement is probably more a statement of her philosophy than a shift in perspective.

Then there's the matter of how she phrased this. "Boatloads" of money? Come on. That's not the language of someone who's looking to make a deal during a global economic bust.

Even though Microsoft (MSFT), the only likely buyer of anything Yahoo's selling, is a very wealthy company by any standard, it's in no position to blithely spend boatloads of money on anything these days. When Microsoft CEO Steve Ballmer first offered a $45 billion boatload of money for Yahoo many moons ago, he planned to take on debt and mortgage his future profits to finance the deal. Today, with Windows and Office sales struggling in a recession, Microsoft is slashing jobs to boost a sagging stock price and praying that its upcoming Windows 7 operating system gives the company a boost. He's looking to do a search deal with Yahoo that makes him look thrifty, not generous.

If you have any lingering doubts left about Bartz's intentions, look at the conditions she set on any sale of Yahoo's search business. Not only would she require boatloads of money, but also continuing access to all search-related data and the right technology. In other words she wants to "sell" it, but maintain access to the most valuable parts.

This is a great idea for more than just search, actually. It works just as well for real estate. In fact, I would like to sell my home for boatloads of money, so long as the buyer does some renovations and lets me continue to live in it. Any takers? (GOOG)

Cisco CEO John Chambers doesn't just talk a good game about telepresence, the videoconferencing technology that creates the illusion you're in a room with someone who's actually thousands of miles away. He's planning to install his company's high-end system in his Silicon Valley home, provided he and his wife can agree on a spot for it. "I figured we could convert one of the kids' old bedrooms," since they've grown up and left the house," he says. "She told me, 'You do that and you'll be sleeping in there.'"

Though he's not done negotiating the location, one thing that Chambers doesn't have to worry about is cost. ­As longtime chief at the networking giant, he can surely afford the installation, which can easily run north of $150,000 per room.

But can his customers? Even as Chambers and rivals such as Hewlett-Packard (HPQ, Fortune 500), Polycom (PLCM) and Tandberg tout telepresence as the perfect tech tool to reduce travel costs and boost productivity, observers have their doubts. Sure, telepresence enables meetings on three or more huge screens, in high definition with pristine audio quality. (CSCO) (HPQ) (PLCM) (T)

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Jon Fortt and Michael Copeland of Fortune weigh in on the latest buzz around Silicon Valley. (AAPL) (GOOG) (MSFT) (YHOO)

On NBC's Press: Here, I talk with a panel about the latest issue of Fortune, the Fortune 500 list, and changes to the tech landscape. (AAPL) (MSFT) (INTC) (CSCO) (GOOG) (TIVO) (EBAY) (YHOO)

During Yahoo CEO Carol Bartz's conference call Tuesday to discuss the company's quarterly results, there was much to discuss: Sales fell 13% and profits sank 78% as advertisers cut back on online spending. And the company confirmed reports of layoffs, saying it would shed about 675 jobs. Yet analysts seemed to care about only one thing: Yahoo's search business.

The worst-kept secret in the tech world is that Yahoo (YHOO, Fortune 500) and Microsoft have been talking again about a potential deal. So everyone wanted to know if Bartz would sell search. But that was the wrong question. A better one: Why would she?

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