Cisco Q3 Keeps the Beat

Q3 growth shows no major surprisies, and Cisco says Q4 is on track as well

May 10, 2005

2 Min Read
Cisco Q3 Keeps the Beat

Cisco Systems Inc. (Nasdaq: CSCO) is still on the mark for its fiscal 2005 growth targets, as its third-quarter earnings report showed no major surprises.

For its third quarter, which ended April 30,Cisco reported net income of $1.4 billion, or 21 cents per share, on revenues of $6.19 billion, compared with net income of $1.4 billion, or 22 cents per share, on revenues of $6.06 billion in the previous quarter. The figures beat out analysts' consensus estimate of $6.15 billion revenues, according to Reuters Research (see Cisco Reports Q3).

For its third quarter a year ago, Cisco reported net income of $1.2 billion, 17 cents per share, on revenues of $5.6 billion.

Pro forma earnings per share were 23 cents, beating analyst expectations of 22 cents as reported by Reuters Research.

Revenues were on par with the mild growth Cisco had predicted for the quarter. The same was true for Chambers's fourth-quarter forecast of revenues "sequentially up approximately 4 to 7 percent."

That would put Cisco at $24.6 billion to $24.8 billion in revenues for fiscal 2005, or 12 to 13 percent growth versus fiscal 2004, right where Chambers has been saying the numbers will fall (see Cisco's Q3 Looking Plain).

The percentages translate into fourth-quarter revenues between $6.44 billion and $6.62 billion, putting analysts's predictions of $6.47 billion revenues on the low side.

Orders for routers grew in the "low double digits" overall, possibly triggering some market share gains, Chambers said. "Our best estimates would be that we could gain one to three points of market share in all three categories," those being core routing, edge routing, and broadband aggregation, he said.

If there was one disappointment, it was advanced technologies -- the collective of wireless, security, IP telephony, storage area networking, optical, and home networking -- which represented just 18 percent of revenues, down about 2 percent from the previous quarter. Chambers said this was "not surprising" given the strong growth the advanced technologies group enjoyed in the January quarter.

Still, the IP telephony group "blew past" the $1 billion run rate,joining security in the billion-dollar club, Chambers said. Orders in storage networking cooled down, to "mid-single digits" sequentially, but that was after a 40 percent boom in the second quarter. Orders in wireless grew double digits sequentially and in the "high teens" compared with last year's third quarter.

Keeping in terms with the unsurprising results, Cisco's stock barely moved after-hours, at press time trading up 9 cents (0.5%) at $18.30.

— Craig Matsumoto, Senior Editor, Light Reading

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