Cisco Reports a Mixed Quarter
Cisco Systems Inc. said Tuesday that profit rose in its fiscal second quarter, but sales missed analysts’ estimates and the company gave a near-term forecast that also disappointed some on Wall Street.
The largest maker of computer networking gear to direct Internet traffic said it earned $1.4 billion, or 21 cents a share, in the quarter ended Jan. 29.
That compares with $724 million, or 10 cents, in the same period of fiscal 2004, which was hit by a $567-million noncash charge resulting from an accounting change.
Excluding one-time items, San Jose-based Cisco earned $1.48 billion, or 22 cents a share, compared with $1.32 billion, or 18 cents, a year earlier.
Earnings met analysts’ expectations. But sales -- which were up 12% from a year earlier, to $6.06 billion -- missed analysts’ forecast of $6.12 billion, according to Reuters.
Sales and net income have been relatively flat for three consecutive quarters. For the current quarter, Cisco said it expected sales to be flat to 2% higher than the second quarter.
“In-line EPS [earnings per share], light on revenue, inventory levels up again,” said JMP Securities analyst Sam Wilson, who characterized the results as “mediocre.”
Cisco shares added 8 cents to $18.24 on Nasdaq in regular trading, then fell to $18.03 in after-hours activity, after its results were announced. The stock is down 5.6% this year after sliding 20.3% last year.
The company’s shares peaked at $82 in 2000.
Cisco, one of the fastest-growing major tech companies of the late 1990s, was slammed by the dot-com collapse at the turn of the decade.
The company has been attempting to offset slower growth in its traditional computer routers and switches with a push into advanced technologies such as phone calling over the Internet and sophisticated network security systems.
Chief Executive John Chambers said during a conference call with analysts that Cisco had a slow start last quarter but that he was becoming “slowly more positive” about the outlook.
“Most people view [the economy] as middle of the fairway, but you’re beginning to see a slowly increasing degree of cautious optimism” among companies, Chambers said. “Time will tell if that translates into a higher degree of capital spending.”
Cisco said it saw weakness last quarter in government accounts and slowness in foreign markets such as France, Germany and Japan.
Also, the company is facing price competition in China, where rivals are offering cheaper networking products. China continues to be a competitive market, Chambers said.
Overall, sales in the current fiscal year will rise in the “middle” of a range of 10% to 15% from the previous year, Chief Financial Officer Dennis Powell told analysts.
He had said during a Dec. 7 presentation to analysts that Cisco expected to “grow at the higher end” of a range of 10% to 15% a year through 2008.
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Bloomberg News was used in compiling this report.
