Cisco profit falls on acquisition charge

Cisco profit falls on acquisition charge

Cisco Systems revenue rose more than 10 percent in the company's fiscal third quarter

Cisco Systems revenue rose more than 10 percent in the company's fiscal third quarter, though its net income fell due to an acquisition charge and other one-time factors.

Revenue rose to US$9.8 billion from $8.9 billion a year earlier, while net income was $1.8 billion, down 5.4 percent from US$1.9 billion in last year's third quarter. Cisco earned $0.29 per share, down from $0.30 per share a year earlier.

But excluding certain charges, earnings were $0.38, up from $0.34 a year earlier, Cisco said. The company took an acquisition-related charge of $246 million, or $0.04 per share, in the quarter.

The charge was related to Cisco's acquisition of the remaining 20 percent of data-center technology vendor Nuova Systems.

Cisco is still comfortable with its long-term revenue growth forecast, Chairman and CEO John Chambers said on a conference call following the release.

The company was hit by the economic slowdown in the US, where product orders were especially slow in enterprises and service providers, but Chambers believes spending will start to rebound by the end of this year. The US is Cisco's biggest market. The company will emerge from the downturn with a bigger share of the market and available profit, just as it did after earlier slowdowns in 1993, 1997, 2001 and 2003, Chambers said.

"This is a relatively short-term challenge going forward," Chambers said. He added that he is optimistic about a majority of the global economy outside the US.

In Japan, service providers are beginning to invest in their next generation of networks, Chambers said. Order growth there is rebounding after about 15 months in the doldrums, he said. This is significant because Japan builds out the latest networks before other parts of the world do, Chambers said.

Results in the Asia-Pacific region as a whole were strong, with China and India leading the way thanks to Cisco's growing investments in both of those countries. The company has based high-ranking executives at a globalization center in India and last year decided to invest aggressively in the Chinese market.

Cisco is optimistic about IP network building, with video driving the most demand. The need for more capacity helped increase revenue for the company's CRS-1 carrier core router by about 150 percent in the quarter, Chambers said. Over the next three to five years, investment in Web 2.0 applications for collaboration will also benefit Cisco, especially as Web 2.0 comes to be defined as voice and video in addition to data applications, he said.

Routing revenue overall grew 14 percent in the quarter, while switching grew by just a few percentage points, a result Chambers attributed to customers hesitating to buy while they evaluate Cisco's recently introduced Nexus data-center platform. Among the company's newer technologies, unified communications was a highlight, growing 46 percent in revenue.

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