Cisco Sales Better Than Expected

Cisco Systems Inc., a bellwether in the devastated networking equipment industry, gave Wall Street a bit to cheer about Monday as it reported better-than-expected quarterly sales amid a loss of $268 million.

Company executives also forecast flat to slightly higher sales for the current three-month period, even though the Sept. 11 terrorist attacks may have knocked as much as 5% off sales growth for the current quarter.

“Looking at flat to up slightly [sales], I think that’s good enough for most investors,” said analyst Jay Ritter at Morningstar Inc. in Chicago.

“It’s good to see some initial signs of things stabilizing.”

Analysts said the latest results showed some unexpected strength, given that the San Jose-based company had previously predicted revenue growth to be flat to down from the fourth quarter to the first.

“They actually grew the business 3.5%,” said Ilya Grozovsky, an analyst at SoundView Technology Corp. “That was clearly a surprise to everyone.”

Sales of $4.4 billion marked an improvement over the prior quarter, although they were still down a third from $6.5 billion in last year’s fiscal first quarter. Analysts were expecting $4.2 billion in sales.

“We’re optimistic, but the short term remains very challenging,” said Cisco’s chief executive, John Chambers.

Cisco’s shares rose 64 cents to close at $17.90 on Nasdaq before the company released its earnings and forecast. Its stock then went as high as $18.90 in after-hours trading. Ritter predicted Cisco will help lead a tech rally today--along with expected news of a Federal Reserve cut in interest rates.

Even so, Cisco stock is down 53% for the year and 69% from its 52-week high of $57.63 a share a year ago.

The data networking industry is still in a long slump, and Cisco, its biggest player, still has a backlog of inventory to work through. The company reduced its inventory, a major thorn in the industry’s side, by about $400 million at the end of July to $1.3 billion.

Cisco, which makes routers and other devices that move traffic over the Internet, has suffered as businesses in general, and telecommunications companies specifically, cut spending.

Chambers said Monday that the company has no plans to reduce staff further, barring a major economic decline. This year, the company has fired 8,500 employees, including 2,500 contract workers, and now has 13,546 on staff.

The company’s loss for its fiscal first quarter ended Oct. 27 amounted to 4 cents a share, contrasted with a profit of $798 million, or 11 cents, for the same period last year.

Excluding one-time items, such as an $858-million charge to write down the value of investments, Cisco earned $332 million, or4 cents a share, compared with $1.4billion, or 18 cents, a year ago. Analysts were expecting a profit of 2 cents a share, according to a survey by Thomson Financial/First Call.

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Associated Press was used in compiling this report.