Cisco revenue, profit grew in fourth quarter

Cisco reported revenue and profit gains for its fiscal fourth quarter ended last month.

Cisco Systems on Tuesday posted solid if unspectacular revenue growth for its fiscal fourth quarter, reporting sales of US$10.4 billion, up 10 percent from a year earlier, despite economic weakness in some parts of the world.

The company's net income for the quarter, which ended July 26, was US$2 billion, or US$0.33 per share. Not counting certain one-time items, it came in at US$2.4 billion, or US$0.40 per share, slightly beating analysts estimates of US$0.39 per share, according to a consensus provided by Thomson Financial. The analysts had forecast revenue of US$10.31 billion.

Chairman and CEO John Chambers explained the gains with a familiar refrain in prepared comments, saying the business process changes and productivity gains enabled by networking are gaining traction worldwide.

For its full 2008 fiscal year, Cisco reported revenue of US$39.5 billion, up 13 percent from the prior year, and net income of US$8.1 billion, or US$1.31 per share.

Chambers said he saw some hopeful signs for IT spending by U.S. enterprises, indicating a slump that began about a year ago may have bottomed out. Overall product orders by enterprises in the U.S. and Canada grew 13 percent in the quarter from a year earlier. Large multinationals and financial services companies led the slowdown and appear to be coming out of it first, with double-digit order growth in the past two quarters, Chambers said. But he said it was too early to tell whether enterprises were truly rebounding.

"We are seeing progress in the U.S. enterprise market," Chambers said on a conference call following the report.

The company's forecasts were cautious, covering only the next two quarters instead of the full 2009 fiscal year. Cisco estimates its revenue will grow about 8 percent in the current quarter, compared with a year earlier, and about 8.5 percent in the second quarter. The company stuck to its long-term forecast of 12 percent to 17 percent year-over-year revenue growth per quarter, without forecasting when quarterly growth would return to that level.

Cisco believes the economic downturn in the U.S. will be relatively short and the company will continue to invest throughout it, hoping to seize a greater share of customers' spending, Chambers said. Outside the U.S., most customers say business growth and gross domestic product (GDP) is solid, he said. Product order growth in several large developing countries, such as China, India, Mexico and Russia, far outpaced other parts of the world, he said.

The company plans to expand its product line into product categories adjacent to its current offerings in many areas, ranging all the way from enterprise data centers to home network devices, according to Chambers.

Among Cisco's newest technologies, Chambers highlighted Telepresence, the high-end video conferencing system. Telepresence sales in the quarter grew about 500 percent from a year earlier, and the systems might generate US$1 billion of revenue per year within five years, he said. Cisco is betting heavily on new collaboration tools such as Telepresence. In the past six months, Cisco's enterprise and service-provider customers have gone from talking about network collaboration theoretically to discussing how they should deploy it, he said.

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Stephen Lawson

IDG News Service
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