Cisco attributes Profit Jump to Networking Gears

Cisco Systems Inc. on Wednesday reported its first quarter results that topped the expectations of Wall Street analysts and sent Cisco's shares up as much as 9% in after-hours trading. The technology firm said that higher sales of the equipments that connect computers to the Internet boosted its earnings for the period ended October 28, 2006.

Profits at Cisco Systems surged 28% over last year as customers were cautious enough to upgrade their networks to accommodate quicker Internet traffic.

Cisco reported net income, on a generally accepted accounting principles (GAAP) basis, of $1.6 billion or $0.26 per share, compared with $1.26 billion, or 20 cents per share, in the same period last year, and on non-GAAP basis, net income of $1.9 billion or $0.31 per share.

Cisco, the San Jose-based worldwide leader in networking that transforms how people connect, communicate and collaborate, said first quarter net sales rose 25% to $8.2 billion, compared with $6.55 billion last year.

Scientific-Atlanta, Inc., a cable set-top box maker, which Cisco bought in February 2006, also showed strong sales growth and contributed net sales of $584 million during the first quarter of fiscal 2007.

According to a survey of market analysts, the company was expected to earn, on average, 29 cents per share on $7.9 billion in revenue.

Overwhelmed with the quarterly results, Dennis Powell, Cisco chief financial officer said, "We are very pleased with our excellent performance for the first quarter."

"We delivered record revenue, net income and earnings per share, with strong operating cash flows of over $2 billion for the third quarter in a row. Our three- to five-year investments are also clearly paying off, resulting in year-over-year revenue growth of 25 percent," he added.

In a conference call yesterday Cisco president and CEO John Chambers delivered the company's second-quarter revenue forecast of 24 percent to 25 percent, or 14 percent to 15 percent growth excluding recently acquired Scientific-Atlanta. However, analysts on average expected 21 percent sales growth in the second quarter, to $8.04 billion.

Chambers also said that Cisco is succeeding in convincing customers to think of the network as the central platform for communications and IT requirements. "This strong momentum demonstrates that customers increasingly share our vision of the network as the platform for all forms of communication and IT," he said.

The increased demand for powerful routers, switches and network upgrades, and a number of significant contracts that Cisco secured during its first quarter, boosted the earnings of the company.

Cisco's stock price gained as much as 9% in after-hours trading, rising $2.26 to $27.36. The company's stock closed up $0.26, or about 1 percent, to $25.10 on the NASDAQ Stock Market, yesterday.