Cisco Reports Profit on Increased Sales

Cisco Systems Inc., the largest maker of specialized computers for directing Internet traffic, Wednesday reported quarterly net income of $618 million as sales rose 9%, besting analysts’ expectations.

Last year, the San Jose-based company lost $268 million, or 4 cents a share, in the quarter.

But Cisco warned that sales in the current quarter would hold steady or fall by as much as 4%, sending shares of the technology bellwether down 11 cents to $12.85 in after-hours trading.

The results were announced after the market closed. In regular Nasdaq trading, Cisco shares gained 27 cents to $12.96.

Sales in its fiscal first quarter grew to $4.85 billion from $4.45 billion in the same period last year. Net income in the three months ended Oct. 26 amounted to 8 cents a share. Cisco took a $412-million pretax charge for the declining market value of publicly traded investments.

“By focusing on what we can control and influence, we saw dramatic year-over-year improvements in net income, gross margins and profitable market share gains,” said Chief Executive John Chambers.

Noting that the number of new orders is declining, Chief Financial Officer Larry Carter said second-quarter revenue could slip by 3% or 4% from the $4.85 billion in the quarter just ended. Analysts had expected sales to increase to $4.89 billion, according to Thomson First Call.

Cisco has lost less revenue and stock market value than many of its competitors in the last year, and it has been saving money by laying off employees. But as the economic slowdown spreads, it hasn’t been able to completely escape the fallout.

“Cisco is doing what it can internally,” said C.E. Unterberg, Towbin analyst Mark Sue, who rates Cisco shares “market perform” and doesn’t own Cisco shares. “Nevertheless, it’s still part of an industry that’s suffering from reduced spending.” Unterberg doesn’t do investment banking business with Cisco.