Cisco Systems Q1 profits jump 37%

Cisco Systems Inc.'s first-quarter profit jumped 37 per cent, edging the world's largest networking supplier past Wall Street's estimate on Wednesday as demand continued rising for sophisticated Internet machinery.

But shares plunged 9 per cent on fears that sudden sluggishness in orders from large US corporations could portend a wider slowdown, an interpretation of the results that Cisco refuted.

Net income was $2.2 billion, or 35 cents per share for the three months ended October. 27. That compares with $1.6 billion in profit, or 26 cents per share in the year-ago period.

Stripping out one-time charges, the San Jose-based company reported earning 40 cents per share, four cents more than the average estimate of analysts polled by Thomson Financial.

Cisco makes routers and switches that direct Internet traffic. It competes with Alcatel-Lucent SA, Nortel Networks Corp. and Juniper Networks Inc.

Sale support

Cisco's strong sales in the first quarter helped it slightly beat analysts' forecasts. Cisco rang up $9.55 billion in sales during the period, a 17 per cent jump over the $8.2 billion recorded last year. Analysts were expecting $9.54 billion in sales.

Concerns about the company's ability to sustain its growth rate dog Cisco, however. Shares finished the regular trading session down $1.33, to close at $32.75.

They fell another $3.02, more than 9 per cent, to $29.73 in after-hours trading after the earnings report came out.

While Cisco's growth is robust in other countries, some analysts worry about growth slowing in orders from large US businesses, one of the company's core markets.

That segment was expanding at a 20 per cent clip early last year. But its growth has fluctuated since then, falling in the current quarter to the mid-single-digit range.

Investors to profit

Management sought to assure investors about the company's long-term prospects, reaffirming its long-term revenue growth-rate target of 12 to 17 per cent. Sales in the second quarter are expected to grow 16 per cent.

"Our business is across every major country in the world, and it's across all product lines, and it's really across all customer segments," Cisco Chief Executive John Chambers said in an interview.

"US enterprise is down to only 40 per cent of our total US business. The other two major US customer segments - service provider and commercial - are very strong."

 

 

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