Cisco Profit Jumps 24%, Just Topping Forecasts

Cisco Systems Inc., the No. 1 computer-networking company, on Tuesday said fiscal second-quarter profit per share rose 24% as revenue from Internet providers offset slowing corporate sales.

Profit before charges for the quarter ended Jan. 23 rose to $606 million, or 36 cents a share, from a net income of $457.3 million, or 29 cents, a year earlier. Cisco was expected to earn 35 cents, the average estimate of analysts polled by First Call Corp. Revenue surged 40%, more than analysts expected, to $2.83 billion from $2.02 billion.

Cisco’s extensive product line and sophisticated software let it charge more and make a higher profit than rivals for the equipment it sells to large companies. As corporate sales slow, Cisco is boosting sales to telecommunications carriers that want high-speed Internet gear to handle growing data traffic.

“The carrier business is where the growth is,” said Paul Weinstein, an analyst at CS First Boston.

Analysts estimated that telecommunication sales make up about a third of Cisco’s revenue. The company doesn’t break out revenue by markets.

On a conference call after the report, Cisco Executive Vice President Don Listwin said the company’s telecommunications revenue increased more than 50% in all geographic areas from a year ago.

Cisco will face increased competition in the market for Internet gear sold to phone companies when No. 1 phone-equipment maker Lucent Technologies Inc. purchases No. 3 networking company Ascend Communications Inc.

Last month, Lucent agreed to buy Ascend for $20.7 billion to acquire its powerful computer switches, known as ATM switches, that let phone companies route data traffic on their networks. The acquisition is expected to be completed in June.

Cisco has said it expects to begin selling its new ATM switch in the fiscal third or fourth quarter.

Cisco shares fell $2.61 to close at $112.39 on Nasdaq. The San Jose-based company, whose stock has risen more than 20% this year, reported results after the close of regular U.S. trading.

The stock traded as low as $108.50 after markets closed because, analysts said, some investors were disappointed that Cisco didn’t declare a stock split

Meanwhile, Mattel Inc., the world’s largest toy maker, said fourth-quarter profit fell 67% as cutbacks in orders by retailers reduced sales. The results were in line with expectations.

Profit before a charge at the maker of Barbie dolls, Hot Wheels cars and other toys fell to $63.8 million, or 21 cents a share, from net income of $195.1 million, or 64 cents, a year earlier. The results matched the average estimate of analysts.

Mattel warned in December that profit for the quarter and year would miss forecasts as Toys R Us Inc. slashed orders to reduce inventories and costs. Problems largely tied to reduced orders from the retailer, its largest customer, prompted Mattel to warn about earnings each of the last four quarters. Revenue in the fourth quarter fell 4.3% to $1.54 billion.

El Segundo-based Mattel also said it is near settling state lawsuits that accuse the toy maker of violating antitrust laws in its dealings with Toys R Us. That resulted in a charge of about $4 million, or 1 cent a share, in the most recent quarter.

The charge made net income $59.5 million, or 20 cents a share. There were no charges or gains in the year-earlier period.

Mattel said it still expects to earn about $1.50 a share this year.

Mattel rose 31 cents to close at $25.38 on the New York Stock Exchange.

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