Cisco said telecommunications companies represented the fastest-growing part of its business during the quarter. Mr. Chambers said sales to telecommunications companies grew 80% in the quarter, compared with the same period a year earlier....
....Revenue continued to surge in the quarter, increasing 48% to $3.55 billion from $2.4 billion in the year-earlier period. It marked Cisco's sixth consecutive quarter of accelerating revenue growth. "To achieve growth verging on 50% as a company with close to a $15 billion [recent annual revenue] rate is just astonishing," said Christopher Stix, an analyst with SG Cowen Securities....
August 11, 1999
Cisco Systems Posts Profit Rise
Of 29%; Revenue Jumps 48%
By SCOTT THURM
Staff Reporter of THE WALL STREET JOURNAL
Continuing to benefit from the explosive growth of the Internet, computer-networking giant Cisco Systems Inc. topped Wall Street expectations with strong increases in revenue and earnings.
Cisco, San Jose, Calif., reported net income of $635 million, or 18 cents per diluted share, for its fiscal fourth quarter ended July 31, up 29% from net of $493 million, or 15 cents a share, in the same period a year earlier.
Excluding one-time charges related to acquisitions, Cisco's earnings increased 38%, to $727 million, or 21 cents a share, from $525 million, or 16 cents a share, in the year-earlier period. Analysts surveyed by First Call/Thomson Financial had expected earnings of 20 cents a share, excluding charges.
The report marked the eighth consecutive quarter that Cisco's earnings topped analysts' expectations by exactly a penny, suggesting that the company is "managing" its earnings, said Paul Sagawa, an analyst at Sanford C. Bernstein Co. As an example, Mr. Sagawa said, Cisco stopped shipping products more than a week before the end of its fiscal third quarter in April, so that those sales were recorded in the quarter reported Tuesday.
"We do not manage earnings," said Cisco Chief Executive John Chambers. "We manage our business very tightly and we're careful about not letting analysts' expectations get above our ability to meet them."
Revenue continued to surge in the quarter, increasing 48% to $3.55 billion from $2.4 billion in the year-earlier period. It marked Cisco's sixth consecutive quarter of accelerating revenue growth. "To achieve growth verging on 50% as a company with close to a $15 billion [recent annual revenue] rate is just astonishing," said Christopher Stix, an analyst with SG Cowen Securities. However, the company cautioned analysts that its growth wouldn't likely continue to accelerate.
For the fiscal year, Cisco reported net income of $2.1 billion, or 62 cents a share, up 55% from $1.36 billion, or 42 cents a share, a year earlier. Excluding one-time charges, net income rose 35% to $2.55 billion, or 75 cents a share, from $1.88 billion, or 58 cents a share, a year earlier. Revenue climbed 43% to $12.15 billion from $8.49 billion.
Cash Hoard
Mr. Chambers told analysts that the company is now generating almost $400 million each month, contributing to Cisco's $9 billion cash hoard, which has grown 73% in the last year. Cisco is beginning to put that cash to use, agreeing last week to invest $1 billion in the consulting arm of Big Five accounting firm KPMG LLC by the end of the year.
"The Internet is emerging as a major force behind the strongest U.S. economy in history," Mr. Chambers told analysts. "If we execute properly we are positioned to be the company that leads the Internet revolution."
Cisco released its results after stock markets closed. Earlier Tuesday, Cisco shares fell $1.0625 to $58.75 in Nasdaq Stock Market trading. In after-hours trading Cisco shares rose sharply to $61, according to Instinet.
Outlook for Industry
Mr. Chambers told analysts in a conference call that Cisco expects the computer-networking industry to grow 30% to 50% a year, and that it would be "challenging" for Cisco to grow faster than the industry as a whole, because of its size.
Cisco said telecommunications companies represented the fastest-growing part of its business during the quarter. Mr. Chambers said sales to telecommunications companies grew 80% in the quarter, compared with the same period a year earlier. By contrast, Cisco's sales to large and small businesses grew by 33% and 34% respectively, Mr. Chambers said. But direct comparisons are difficult, because Cisco does not provide detailed breakdowns of its revenue streams.
"There are a couple of product categories that are just on fire," said Mr. Sagawa, citing Cisco's routers that funnel telephone and computer traffic onto the Internet, and then direct this traffic around the Internet.
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