Cisco posts strong gain in Q1 earnings

Cisco posts strong gain in Q1 earnings

Cisco Systems' fiscal first-quarter revenue and profit surged above results from a year earlier, with the network equipment supplier bringing in US$5.1 billion and earning $0.15 per share, the company reported Wednesday.

Net income for the quarter was $1.1 billion, up from $618 million one year earlier, with earnings per share up from a year-earlier figure of $0.08. Revenue exceeded the first-quarter 2003 result of $4.8 billion.

On a pro forma basis, excluding certain items, Cisco posted earnings per share of $0.17. That surpassed the estimates of financial analysts surveyed by Thomson First Call, who had expected $0.15 per share. Revenue also beat analyst estimates of about $4.9 billion.

The San Jose, California, company's results in the U.S. suggest the economic recovery may be gaining strength, President and Chief Executive Officer John Chambers said on a conference call to discuss the results. Growth in U.S. bookings was "solid" for both enterprise and service provider products, he said. He remained cautious, however.

"The recovery appears to be slowly gaining momentum but is still fragile in the minds of our customers," Chambers said. He is looking toward a gradual, industry-by-industry "rolling recovery." Many enterprises are waiting for their own results to improve before spending more, he said.

As for Cisco's own outlook, he also is growing more positive.

"In areas that we can control or influence ... I continue to be more optimistic than I was going into the previous quarter," Chambers said.

The company expects to report a slight sequential gain in revenue when it announces fiscal second-quarter results next Feb. 3.

Among areas of strength, enterprises are embracing Gigabit Ethernet LAN equipment at a higher rate than Cisco had expected, and service providers are buying gear to help them deliver new, revenue-producing services, executives said during the call.

Revenue from six "advanced technology" areas that Cisco is trying to build into billion-dollar businesses made up a growing share of sales in the quarter. Together, those segments -- IP (Internet Protocol) telephony, home networking, optical networks, security, storage networks and wireless -- made up 14 percent of total revenue. Routers brought in 25 percent, switches 41 percent, services 16 percent and other sources about 4 percent.

In the quarter, 49 percent of Cisco's bookings came from the U.S., and Japan accounted for 9 percent, both shares up slightly. The Asia-Pacific region had 11 percent of orders, also up slightly, while Latin America and Canada brought 5 percent, up from 4 percent. Europe, the Middle East and Africa accounted for just 26 percent, down from 32 percent the previous quarter. The first quarter is typically soft in that region, Chambers said. Meanwhile, orders in Russia were up in double digits both sequentially and year-over-year, he added. Gains were also seen in China and India.

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