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CSCO ,,, Cisco's 3Q Earnings Beat Expectations
Wednesday May 11, 5:05 pm ET
By Matthew Fordahl, AP Technology Writer
Cisco's Third-Quarter Earnings Leap 16 Percent, Beating Expectations; Shares Up on News


SAN JOSE, Calif. (AP) -- Cisco Systems Inc.'s fiscal third-quarter profit jumped 16 percent as network equipment maker continued to benefit from its expansion into emerging technologies that integrate with its traditional business of routers and switches.
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Its shares rose 34 cents to close at $18.55 in Wednesday trading on the Nasdaq Stock Market. They have traded in a 52-week range of $17.01 to $24.20.

After the markets closed Tuesday, Cisco said its third-quarter sales jumped more than 10 percent, and it expects sales to continue to rise through the end of its fiscal year.

"The bottom line is we think our strategy is working very well," Chief Executive John Chambers told financial analysts on Tuesday.

For the three months ended April 30, the San Jose-based company earned $1.4 billion, or 21 cents per share, compared with $1.2 billion, or 17 cents per share, in the same period last year.

Sales rose 10.1 percent to $6.19 billion in the third quarter of fiscal 2005 from $5.6 billion last year.

Excluding special items, Cisco earned $1.5 billion, or 23 cents per share, compared with $1.36 billion, or 19 cents pre share in the same period last year.

On that basis, the results beat Wall Street expectations. Analysts were expecting the company to post a profit of 22 cents per share on sales of $6.16 billion, according to a survey by Thomson Financial.

In the first nine months of fiscal 2005, Cisco earned $4.2 billion, or 63 cents per share, on sales of $18.2 billion. In fiscal 2004, it earned $3.021 billion, or 43 cents per share, on sales of $16.1 billion.

The company also announced plans to begin expensing employee stock options starting in the first quarter of fiscal 2006. Additional details were to be announced during the company's next earnings conference call, said Dennis Powell, Cisco's chief financial officer.

Chambers said the key to the company's success has been technologies such as Internet telephony, storage, wireless and security, and their integration with its traditional businesses of routers and switches that direct data over networks.

The company expects the growth to continue into the fourth quarter, saying revenue should be between $6.45 billion and $6.6 billion -- a year-over-year jump of 9 percent to 11 percent and higher than analyst average expectation.

The company's fiscal third quarter is typically among the weakest of the year as companies, governments and consumers slow down spending. The quarter also had one less week than the same period in fiscal 2004.

"The home run for the quarter was the continued balance that we've been able to achieve in geographies, market segments and product families," Chambers said.

He also said Cisco's largest gainer in order growth was its service provider business that provides equipment to telecommunications companies. Orders jumped 20 percent from the second quarter and 25 percent from the third quarter of last year, he said.

Cisco also highlighted continued growth in advanced technologies. It sold its 5 millionth Internet phone during the quarter -- just five months after selling its 4 millionth. By comparison, it took the company three years to sell its first million phones.

"It is very possible we will soon become the largest provider of overall enterprise telephony," Chambers said.

Cisco's work force expanded by nearly 1,100 employees during the third quarter, and it plans to add more in the current period.

Overall, Cisco's third-quarter numbers were good and the guidance for the fourth quarter was better than expected, said Samuel Wilson, an analyst at JMP Securities.

"Cisco is driven first and foremost by the general economic information technology spending trend," he said. "When it comes to market share, the (strategy) makes sense. Given their cards, it's the right play to make."

Cisco: http://www.cisco.com





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