Cisco profit jumps, revenue seen rising, quarterly net income surged 76 percent
11/5/2003 7:40:09 PM
www2.marketwatch.com
By Jim Christie and Duncan Martell
SAN FRANCISCO, Nov 5 (Reuters) - Cisco Systems Inc. (CSCO) , the world's largest maker of equipment that directs Internet traffic, on Wednesday said its quarterly net income surged 76 percent as corporations and telecommunications carriers spent more on technology.
Cisco said current-quarter revenues would also rise, and the company's shares climbed 5 percent in after-hours trade following the results, which topped even the most optimistic Wall Street estimates.
The strong results, taken with quarter-on-quarter sales gains at telecom equipment vendors such as Lucent Technologies Inc. (LU) and Nortel (CA:NT) (NT) , point to a recovery for the beleaguered sector, said Barry Jaruzelski, lead partner in Booz Allen Hamilton's electronics practice.
"This is the most compelling proof-point that this quarter represents the turning point for telecommunications and data communications infrastructure," Jaruzelski said.
Analyst Mark Sue of C.E. Unterberg, Towbin agreed that Cisco's results pointed to stronger spending on communications equipment.
"A good portion of its customer base is feeling better, and it showed in the top-line results," he said.
Cisco Chief Executive John Chambers said the company saw strength across its core switching and routing businesses and in its advanced technologies segments.
In an interview, Chambers said it was clear to him that an economic recovery was under way. "The question is, what sort of legs will it have, how strong will it be, and how long will it last?"
BETTER THAN EXPECTED
Cisco, based in San Jose, California, said net income rose to $1.1 billion, or 15 cents a share, in its fiscal first quarter ended Oct. 25, from $618 million, or 8 cents a share, a year earlier.
Excluding one-time items it earned $1.2 billion, or 17 cents a share. On that basis, analysts had expected a profit before one-time items of 15 cents a share on average, within a range of 14 cents to 16 cents, on sales of $4.85 billion, according to Reuters Research, a unit of Reuters Group Plc.
Sales rose a better-than-expected 5.3 percent to $5.10 billion from $4.85 billion a year earlier.
Linksys, the home network gear maker that Cisco acquired this year, reported $119 million in revenue, which was in line with Cisco's expectations.
Cisco acquired Linksys to expand in the home network market. Cisco is also moving into Internet Protocol telephony and security markets and into networking markets for optical, wireless and storage technology.
Cisco said 49 percent of first-quarter revenue came from its U.S. market, compared with 47 percent in the previous quarter, reflecting improved carrier spending and seasonally strong spending by the federal government.
Revenue from the company's Japan and Asia Pacific markets also rose from the previous quarter, while revenue from Europe fell from amid a seasonal slowdown.
"The enterprise segment was strong and the service providers finally began to open up their purses," Sue said. "Internationally, Cisco saw improving trends in Japan for the first time in several quarters."
REVENUES SEEN RISING
Cisco Chief Financial Officer Dennis Powell forecast revenue in the current fiscal second quarter would rise 1 percent to 3 percent from the recently completed period, and would be about 10 percent above the year-earlier period.
Analysts on average had been expecting second-quarter sales of $5.04 billion, within a range of $4.85 billion to $5.23 billion. The rise Powell projected would put second-quarter sales in the range of $5.15 billion to $5.25 billion.
Chambers said half of Cisco's customers were cautiously optimistic they would raise spending on tech products. He noted that first-quarter sales marked the first time in more than two years that Cisco had posted revenue growth in the mid-single digits on a quarter-on-quarter and year-over-year basis.
Yet Chambers was also characteristically cautious.
"You're still in a fragile environment, but I think the trends are right," Chambers told Reuters.
"I don't think he wants to be the first one to say the clouds have parted," Sue said. "A good portion of the customers feel better, but a good portion also is wondering when things will improve.
Cisco shares rose in after-hours trade to $22.90. The stock had closed at $21.80 in regular trade on Nasdaq, up 22 cents or 1 percent.
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