Cisco Second-Quarter Profit Surges 40%, Topping Estimates

Cisco Systems' second-quarter profit surged nearly 40% as the world's largest maker of networking gear benefited from equipment upgrades to support bandwidth-hogging video downloads.

The company also raised its revenue guidance for the current quarter, apparently quashing near-term fears about slowing growth as its customers complete the most extensive round of network upgrades since the pre-Y2K scramble.

Cisco shares jumped over 5% in extended-session trading.

For the quarter ended Jan. 27, Cisco's net income was $1.9 billion, or 31 cents per share, compared with $1.4 billion, or 22 cents per share, for the same period last year.

Excluding one-time charges, Cisco said Tuesday it earned $2.1 billion for the quarter, or 33 cents per share.

The San Jose, California-based technology bellwether, which makes the routers and switches that direct data over computer networks, said revenue for the quarter was $8.4 billion, a 27% jump from the $6.6 billion in the same period last year.

Analysts were expecting Cisco to earn, on average, 31 cents per share on $8.28 billion in revenue, according to a survey by Thomson Financial. "Cisco achieved record results that were well balanced across our geographies, products, services, customer segments and new markets," Cisco Chief Executive John Chambers said in a statement. "This illustrates our key competitive advantage of being able to develop a long-term vision, execute on our strategy and deliver consistent results."

The company is profiting from an onslaught of service providers spending lavishly to boost the bandwidth on their networks and accommodate video downloads that consume thousands of times the network space as e-mail messages.

Aside from enabling faster downloads and higher video quality, Cisco's gear is also being snapped in anticipation of the emergence of Internet Protocol Television, or IPTV -- TV delivered over a broadband connection.

But some analysts have expressed concerns about slowing growth as the initial boost from its acquisition of Scientific-Atlanta Inc. wears off.


Cisco said $639 million of its second-quarter sales came from Scientific-Atlanta, the world's second-largest cable television box seller that Cisco acquired for $6.9 billion in the third quarter of last year.

Some of those fears appeared to dissipate on Cisco's bullish forecast for the rest of the fiscal year. The company expects third-quarter revenue of $8.7 billion to $8.8 billion, an increase of 19 to 20% over last year, Cisco Chief Financial Officer Dennis Powell said on a conference call.

However, those results include an "above normal" boost from Scientific-Atlanta sales, still leaving Cisco's standalone growth rate in the 15% to 17% range and above the company's previous forecasts, Powell said.

The momentum is expected to continue into the fourth quarter, with Cisco forecasting revenue of $9 billion to $9.3 billion, an increase of 14% to 16% over the same period last year.

Chambers said the company will continue to benefit from a promising pipeline of new routing and switching products and continued strong sales worldwide. "This obviously indicates a high degree of confidence in our strategy and business momentum," Chambers said on the conference call. "We believe that our vision, strategy, and execution are in great shape."