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Optical/IP

Cisco Continues Its Hot Streak

Cisco Systems Inc. (Nasdaq: CSCO) beat estimates for the second quarter and set up some unusually strong forecasts for the next two quarters.

For its second quarter, which ended Jan. 27, Cisco reported net income of $1.9 billion, or 31 cents per share, on revenues of $8.4 billion, compared with profits of $1.4 billion, or 22 cents per share, on revenues of $6.6 billion as reported during the year-ago quarter.

Non-GAAP earnings of 33 cents per share outdid the analyst consensus by 2 cents, as measured by Reuters Research. It's the second quarter in a row that Cisco has reported surprisingly good results. (See Cisco Soars in Q1.)

Cisco predicted 19 to 20 percent growth in the April quarter. That would put third-quarter revenues between $8.7 billion and $8.8 billion, outdoing the $8.56 billion analysts were expecting.

The forecast translates into growth of 15 to 17 percent for "standalone" Cisco -- that is, the part excluding Scientific Atlanta , which was acquired during Cisco's April quarter in 2006.

That's well above the 10 to 15 percent prediction that normally conservative Cisco set for its long-term expectations, CEO John Chambers noted during the company's conference call today.

"We are probably going to maintain the aggressive guidance, staying in the mid-teens in Q4," Chambers said.

Cisco shares were up $1.50 (5.5%) to $28.78 in early after-hours trading.

What's going right? As he's done in recent months, Chambers pointed to the long-term strategies Cisco set in place three to seven years ago, when the company began placing bets on networking becoming an integral part of most businesses. This year of good numbers is the result of those plans, he said.

The "advanced technologies" -- potential $1 billion businesses such as home networking and security -- continued to fuel Cisco's growth. While routing and switching grew 18 percent and 13 percent, respectively, from the previous year, advanced technologies grew 23 percent, not including Scientific Atlanta.

Storage led all advanced technologies in growth, with sales 45 percent higher than the previous year. Wireless recorded growth in the "mid-20s," Chambers said.

And Scientific Atlanta is a star, with sales growing "well above 20 percent" compared with the previous year, Chambers said. Scientific Atlanta contributed $639 million in revenues during the quarter.

Cisco's optical business has been kicked out of the advanced technologies fold, but Chambers noted that that group saw 40 percent growth during the quarter. (See Cisco Rallies in Q2, Hides Optical.)

— Craig Matsumoto, West Coast Editor, Light Reading

Pete Baldwin 12/5/2012 | 3:15:13 PM
re: Cisco Continues Its Hot Streak Chambers during the call: "The advanced technologies revenues are now becoming larger in terms of their total contribution to our top line than even routing is."

Could be a sign that Cisco's diversification and Advanced Technologies strategies have worked.

... or, it's a sign that Scientific Atlanta is just really big and that any group you add it to suddenly looks great.
networker62 12/5/2012 | 3:15:11 PM
re: Cisco Continues Its Hot Streak I remember that around 2000, such an announcement would have resulted in a very busy message-board, with investors discussing the potential and giving argument why you should buy (or sell).

Now .... ? Not one !

Does this show that it is time again to invest in telecom ?
backstabber 12/5/2012 | 3:15:10 PM
re: Cisco Continues Its Hot Streak Maybe it is because we know better nowadays. In 2000, we didn't know that earnings can become virtual. We didn't know $900m can be wiped out on paper through a press release. Calling that investing would be an oxymoron. It is better to give that money to a deserving charity.

materialgirl 12/5/2012 | 3:15:09 PM
re: Cisco Continues Its Hot Streak I believe this is real and not real at the same time. It is real in the sense that CSCO is going to be selling big systems to big service providers for a long time. I do not believe JNPR ALU or NT will share much in the wealth.

I also believe this entire investment cycle is a sorry mistake, much like 3G. The end consumer wants a two-way and interactive connection, not just HD. I fear this costly networks will be built for no ROI as the best demos, and the advertisers who chase them, will be stuck in a narrowband ghetto using GOOG.

So,nice blip. Real, too. Then a sorry death.
saramach 12/5/2012 | 3:15:09 PM
re: Cisco Continues Its Hot Streak Scientific Atlanta is really pulling things for Cisco. And Cisco's investment decisions are paying off. With this, and the consolidation in the telecom industry, it would be interesting to watch how Juniper grows. Stock backdating is the last thing Juniper would have wanted to get into.. But,it has. 2007 is going to be the key year for Juniper. But, nonetheless, who thinks there is still a big war going on between Cisco and Juniper?
tsat 12/5/2012 | 3:15:08 PM
re: Cisco Continues Its Hot Streak
Juniper still took 500 million of revenue from Cisco last quarter.

-tsat
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