Was this it? dated Jan 14th 15.55 EST
By Peter Loftus, Staff Reporter
NEW YORK -(Dow Jones)- As consumers and businesses continue to demand faster and better Internet access, computer networking companies reaped the benefits with strong latest-quarter results.
"I think the underlying demand remains excellent," said Andy Schopick, analyst with Nutmeg Securities. "Clearly, there is a tremendous movement to high-speed access."
Cisco Systems Inc. (CSCO) continued its dominance in selling networking products such as switches and routers, which manage the flow of data over the Internet, and is starting to add service providers to its traditional corporate customer base.
Schopick expects San Jose, Calif.-based Cisco to report earnings, excluding acquisition-related costs and one-time items, of 26 cents a share for its second quarter ending January, three cents higher than the mean estimate of analysts surveyed by First Call/Thomson Financial, and up from 18 cents a year ago. He expects revenue to rise 39% to $3.95 billion.
In pursuit of emerging technologies, Cisco has made a few big acquisitions in recent months. In December, for example, it bought the optical systems unit of Italy's Pirelli SpA for $2.15 billion.
The acquisitions have allowed Cisco to remain one of the few large, stand-alone data networking firms. Others have been snatched up in the past two years and are now units of telecommunications equipment makers Lucent Technologies Inc. (LU), Nortel Networks Corp. (NT) and Marconi PLC of the United Kingdom.
Cisco's two remaining stand-alone rivals recently posted improved earnings for their most recent fiscal quarters. Santa Clara, Calif.-based 3Com Corp. (COMS) reported earnings, excluding one-time items, of 37 cents a share for its second quarter ended Nov. 26, up from 36 cents a share a year ago. The latest quarter beat analysts' estimate by three cents a share.
The company cited streamlined operations, cost controls and reduced inventories for the profit improvement. But while 3Com's profits improved slightly, its sales fell, dropping 4% to $1.47 billion from $1.54 billion a year ago. A drop in sales of network systems products, including switches, hubs and remote access concentrators, hurt overall sales.
3Com also advised analysts to lower their expectations for its third quarter ending February. Analysts now expect the company to post third-quarter earnings of 25 cents a share, down from the previous estimate of 32 cents.
3Com is spinning off its most successful unit, Palm Inc., which makes handheld computer devices. In December, Palm filed for an initial public offering of $100 million in stock. 3Com previously said it would sell 20% of Palm's shares to the public and would later distribute the remaining 80% to 3Com shareholders.
Cabletron Systems Inc. (CS) reported earnings, excluding items, of 12 cents a share for its third quarter ended Nov. 30, reversing a loss of 14 cents a share a year ago, excluding items. Its revenue rose 13% to $371.7 million.
The Rochester, N.H.-based company boosted sales of its SmartSwitch Router product, which is a leader among so-called Layer 3 products, an emerging class of switches designed to improve traffic flow on the Internet. Cabletron's results also benefited from reduced costs.
While 3Com and Cabletron try to keep up with Cisco, a slew of younger, fast-growing rivals are trying to carve niches in the networking market.
Extreme Networks Inc. (EXTR), which makes LAN switches, should report earnings of nine cents a share on revenue of $52.5 million for the fourth quarter ended Dec. 31, said Robertson Stephens analyst Paul Johnson. The Cupertino, Calif.-based company earned eight cents a share on $47.2 million in revenue in the third quarter. Year-ago comparisons aren't meaningful because the company went public in April.
Johnson expects Juniper Networks Inc. (JNPR) to post fourth-quarter earnings of a penny a share on revenue of $35 million. The Mountain View, Calif.-based firm, which went public in June, posted a loss of four cents a share on revenue of $29.6 million in the third quarter.
Juniper introduced its second major product in the fourth quarter, the M20 Internet backbone router, that is designed to move Internet traffic more quickly at the edges of big networks. Its earlier products directed Web traffic at the center of networks. Verio Inc. (VRIO), a Web hosting and Internet-access company, agreed to buy $7 million worth of Juniper's M20.
Another upstart networking firm, Copper Mountain Networks Inc. (CMTN), should post fourth-quarter earnings of at least eight cents a share on revenue of $36.8 million, said Kaufman Brothers analyst Barry Sine, matching the mean analyst estimate. The Palo Alto, Calif., company, which had its IPO in May, reported third-quarter earnings of eight cents a share on revenue of $32 million.
Sine thinks Copper Mountain, which makes equipment for high-speed Internet access, could beat his earnings estimate by a penny or two. Two key Copper Mountain customers, Rhythms NetConnections Inc. (RTHM) and Northpoint Communications Group Inc. (NPNT), recently said they expected strong fourth-quarter results, which could translate into higher-than-expected sales for Copper Mountain.
Another potential boost to earnings is that Copper Mountain's fourth-quarter expenses may have been lower than expected, Sine said. The company told Sine that it was having difficulty finding enough qualified engineers and sales employees, which could result in lower payrolls, he said.
Redback Networks Inc. (RBAK) is expected to post fourth-quarter earnings of a penny a share on revenue of $24.7 million, said Sine. The Sunnyvale, Calif.-based company, which had its IPO in May, reported a loss of two cents a share on revenue of $20.6 million in the third quarter.
Redback, which makes a box designed to improve high-speed network traffic flow, made a splash during the quarter when it agreed to acquire closely held Siara Systems for $4.3 billion in stock. Siara, Mountain View, Calif., is developing processing hardware and routing and signaling software for network operators. It hasn't released a product yet and has virtually no revenue, but Redback is betting that the purchase will broaden its range of products. |
