Cisco’s Profit Up 36%; 3-for-2 Stock Split Set

Cisco Systems Inc. said Tuesday that its fiscal fourth-quarter profit climbed 36% as the No. 1 maker of networking equipment dominated sales of computer switches to large businesses and pushed into new markets.

San Jose-based Cisco, which also declared a 3-for-2 stock split, said profit before a charge for the quarter ended July 25 rose to $522.8 million, or 48 cents a diluted share. That compared with profit of $383.2 million, or 37 cents, before a gain and charges a year ago. Analysts expected 47 cents, according to First Call Corp.

Cisco sells more than 80% of the switches that link computers in corporate networks and can squeeze out higher profit than rivals Bay Networks Inc. and 3Com Corp. because of its broad product line. That prominence with business customers is giving Cisco an entree with phone companies, which are looking for new equipment to deliver data.

“They’re riding a good wave with their switching products,” said Paul Weinstein, an analyst at Credit Suisse First Boston.

Revenue rose 35% to $2.39 billion from $1.77 billion.

Cisco can charge more for its switches because it offers a package of products and has an aggressive sales force, Weinstein said.

The company’s gross margin, or the percentage of revenue left after deducting product costs, widened to 65.7% from 65.1% a year ago.

“They’re increasing sales and maintaining margins; that’s a solid combination,” said Art Bonnel, manager of the Bonnel Growth Fund.

Cisco is getting its share of the exploding market for data-networking equipment sold to telecommunication companies, a market where it’s battling Ascend Communications Inc. and large phone-equipment makers Lucent Technologies Inc. and Northern Telecom Ltd.

“We are winning significant accounts for voice-data integration” equipment, Chief Executive John Chambers told analysts on a conference call.

Large telecommunications providers, including Sprint Communications Corp. and US West Inc., chose Cisco equipment this year to combine voice and data traffic on their networks, Chambers said.

Cisco shares fell $3.38 to close at $93.13 on Nasdaq in a broad market sell-off. Its earnings report was released after markets closed.