Cisco Earnings and Sales Improve, Top Expectations

Sales and earnings at Cisco Systems rose from last year and outpaced analysts' forecasts, as more customers resumed upgrading their networks to handle increasing wireless and Internet traffic.

The leading maker of network equipment expects to hire 2,000 to 3,000 people in the next several quarters, CEO John Chambers said in another sign of his confidence in the economic recovery.

Cisco forecast revenue growth accelerating to a range of 23 percent to 26 percent in the current quarter, against the average Wall Street forecast for an increase of 16.5 percent year on year.

"During the quarter we saw dramatic across-the-board acceleration and sequential improvement in our business in almost all areas," Chambers said in a statement.


As the economy improved, Cisco's customers have resumed upgrading their networks to handle growing Web traffic, boosting sales of the company's routers, switches and other equipment that support wireless and Internet use.

Chambers said results for the fiscal second quarter ended Jan. 23 were "remarkably well-balanced" between products and geographies, indicating a solid recovery was underway.

The computer networking giant said it earned 40 cents a share in its fiscal second quarter, excluding one-time items, up from 32 cents a share lon a comparable basis last year.

Profit including items rose to $1.9 billion, or 32 cents a share, from $1.5 billion, or 26 cents a share, in the year-ago quarter, Cisco said.

Sales jumped to $9.8 billion, up 8 percent from $9.089 billion in the same period a year earlier. It was Cisco's first year-on-year revenue growth since the quarter ended October 2008.

"We're very pleased with the results. We think the strong year-over-year revenue growth indicates that Cisco is well positioned as we continue to emerge from the downturn," said William Kreher, an analyst with Edward Jones.

Cisco CEO Sees Strong Recovery

"I'd say that Cisco's investments during the downturn are going to pay off very nicely given their geographic reach, and the results today show the beginning of that effect," he said.

Analysts who follow Cisco anticipated the company earning 35 cents a share on sales of $9.409 billion on average, according to a consensus estimate compiled by Thomson Reuters.

"...We believe [the results] provide a clear indication that we are entering the second phase of the economic recovery," CEO John Chambers said in a statement.

Shares of Cisco rose about 4 percent in extended trading Wednesday.Click here for after-hour Cisco stock quotes.

The stock finished the regular Nasdaq session less than 1 percent higher at $23.07.

The results come a year after Chambers gave a weaker-than-expected revenue forecast and announced job cuts, stoking fears of a 2001-style freeze in technology spending.

Yet, results over the past year have shown cutbacs were not so drastic as companies were not as over-invested in network equipment as they were a decade ago.

While phone service providers and large corporations did indeed trim spending in 2009, many have recently resumed spending as the popularity of smartphones like Apple Inc's iPhone and increasing use of online video continue driving Internet traffic.

Cisco is one of the first major technology companies to report results that include much of January 2010. Its performance and outlook are often an early indicator for the rest of the technology sector, especially in enterprise spending.

Related Tags