Cisco results defy slowdown in sector

Sales of new products such as IP telephony, WiFi and storage equipment, along with solid growth in its core switching and routing businesses, lifted revenues at during the latest quarter above Wall Street estimates.

The figures, reported on Tuesday, showed the leading maker of networking equipment had not felt the slowdown reported recently by other companies in its industry, contributing to a 3 per cent jump in shares in after-market trading.

John Chambers, chief executive, called the latest period a ð&ery strong quarterðÐhelped by an all-round performance from its various product groups. ðhere was very good balance across all three of our major customer segments,ðÐhe said.

Despite the confident comments about the outlook in the coming weeks, Cisco disappointed some analysts by not raising its earnings forecasts for the present quarter.

Mr Chambers noted the warnings of a slowdown issued by some competitors in the networking business and ðoncerns about the overall European growthðÐas possible signs the present strength in Ciscoð# sales would not continue.

He added, however, that business momentum was actually increasing, and that the company expected orders growth once again to exceed revenue growth in the period.

Excluding the impact of Scientific-Atlantic, the set-top box maker acquired in February, revenues would have grown 12 per cent in the three months to the end of April, the third quarter of the companyð# fiscal year, which was faster than the 10.5 per cent analysts had expected. Including the results of Scientific-Atlanta, which contributed $407m in sales in the period, Cisco reported overall revenues of $7.3bn, an 18 per cent increase from a year before.

Due to a change in the accounting treatment of employee stock options, Ciscoð# net income remained broadly flat at $1.4bn, or 22 cents a share.

Excluding the impact of options, Cisco said its earnings would have risen 21 per cent to $1.813bn, or 29 cents a share. On that basis, Wall Street had expected earnings of 26 cents a share, though Cisco said a foreign tax settlement had lifted earnings 2 cents a share in the quarter.

While Wall Street analysts take stock option expenses into consideration when assessing some technology companies, those that follow Cisco still disregard the expenses when making estimates of its earnings ðÐan approach that has been encouraged by the networking company, which was one of the strongest Silicon Valley opponents of the change.

As expected, the acquisition of Scientific-Atlanta ate into Ciscoð# overall profit margins. Pro-forma operating margins slipped to 29.9 per cent, from 31.2 per cent the year before.

Excluding the impact of Scientific-Atlantic, the set-top box maker Cisco acquired in Feburary, revenues would have grown 12 per cent in the three months to the end of April, the third quarter of the companyð# fiscal year, faster than the 10.5 per cent analysts had excepted.

ðhere was very good balance across all three of our major customer segments,ðÐsaid John Chambers, chief executive officer.

Including the results of Scientific-Atlanta, which contributed $407m in sales in the period, Cisco reported overall revenues of $7.3bn, an 18 per cent increase from a year before.

Due to a change in the accounting treatment of employee stock options, Ciscoð# net income remained broadly flat at $1.4bn, or 22 cents a share.

Excluding the impact of options, Cisco said its earnings would have risen 21 per cent to $1.813bn, or 29 cents a share. On that basis, Wall Street had expected earnings of 26 cents a share, though Cisco said that a foreign tax settlement had lifted earnings by 2 cents a share in the quarter.

While Wall Street analysts assess some technology companies after deducting stock options, those that follow Cisco still deduct the expenses when making estimates of its earnings ðÐan approach that has been encouraged by the networking company, which was one of the strongest Silicon Valley opponents of the change.

As expected, the acquisition of Scientific-Atlanta ate into Ciscoð# overall profit margins. Pro-forma operating margins slipped to 29.9 per cent, from 31.2 per cent the year before.

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