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Cisco Q4 Hits the Mark

Craig Matsumoto
8/8/2006
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Cisco Systems Inc. (Nasdaq: CSCO) finished its fiscal year on solid footing, today reporting fourth-quarter revenues 12.5 percent higher than a year ago.

The good news -- and a sunny fiscal 2007 forecast -- could give Cisco stock a much-needed jolt. In early after-hours trading, Cisco shares were up $1.58 (9.1%) at $18.87.

For its fourth quarter, which ended July 29, Cisco reported net income of $1.5 billion, or 25 cents per share, on revenues of $7.98 billion, compared with the previous quarter's net income of $1.4 billion, 22 cents per share, on revenues of $7.3 billion.

For its fourth quarter a year ago, Cisco reported net income of $1.3 billion, 20 cents per share, on revenues of $6.6 billion. Those figures are adjusted to include the expensing of stock options, which wasn't common practice at the time.

Pro forma earnings of 30 cents per share beat the consensus estimate of 28 cents as tallied by Reuters Research.

Cisco's fiscal year revenues of $28.48 billion were 14.5 percent higher than last fiscal year's $24.8 billion -- making good on CEO John Chambers's prediction that Cisco, not including the Scientific-Atlanta acquisition, could enjoy yearly revenue growth of 10 to 15 percent.

Cisco is coming out of fiscal 2006 with a strong start, too, CEO John Chambers told analysts on today's earnings call.

"When you see our ending backlog for fiscal 2006," available in Cisco's upcoming 10-K filing with the Securities and Exchange Commission (SEC) , "we will have increased our Cisco standalone product backlog approximately $700 million over the ending backlog of fiscal 2005," Chambers said. The increase is "due almost entirely to the strong order growth in Q3 and Q4."

Cisco's total backlog is about $3 billion, CFO Dennis Powell added later.

The numbers are consistent with the upbeat mood of Cisco's third-quarter earnings call in May, when Chambers noted Cisco wasn't experiencing the glitches that were affecting competitors' revenues. (See Cisco Q3 Gives It an Edge .)

The company said it expects first-quarter revenues to climb 19 to 21 percent from year-ago results, a prediction of $7.74 billion to $7.87 billion. That's on par, barely, with the $7.86 billion prediction listed by Reuters.

Having completed the Scientific-Atlanta acquisition, Cisco now expects 2007 revenues to best 2006 figures by 15 to 20 percent. Cisco "standalone," without Scientific-Atlanta, should see yearly revenues increase by 10 to 15 percent in 2007, Chambers said.

Scientific-Atlanta represented $582 million of Cisco's fourth-quarter revenues.

During the call, Chambers went out of his way to highlight the CRS-1 core router, noting that orders in the fourth quarter "comfortably blew through" the $100 million mark.

— Craig Matsumoto, Senior Editor, Light Reading

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Pete Baldwin
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Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 3:45:20 AM
re: Cisco Q4 Hits the Mark
Here are some extra notes that didn't make it in before deadline:

* Cisco's Q1 is seasonably weak, so this guidance was aggressive by Cisco standards. All that nice backlog could get offset by the usual slump in orders.

* Sci-Atlanta beat Cisco's goals. Chambers had predicted SA could grow 12-14% per year after the merger; in Q4, it grew 15%

* We've written before about Cisco's aim to become more of a consulting partner, rather than just an equipment vendor. Chambers says this is coming true on the service provider side, and he made an interesting comment:

"While it is too early to say for sure, I would personally parallel this progress to a very simliar evolution that Cisco achieved in the enterprise market in the mid 1990s." emphasis added)

... meaning, if I'm interpreting that right, that he sees Cisco becoming the lone superpower in the service provider market. It seems uncharacteristically brash -- is Cisco's future in carrier markets already set?

* By the way, it occurs to me the headline could be confusing. I'm aware Cisco beat guidance, the "mark" referred to is the year-over-year revenue goal.

* Other notes: Chambers commented on Alcatel market share gains in IPTV/routers (loosely put, he thinks Alcatel gained on some techicalities and expects Cisco to regain share) .... also a fragmented comment on consumer markets that I'm going to have to listen to again.
jasanz
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jasanz,
User Rank: Light Beer
12/5/2012 | 3:45:18 AM
re: Cisco Q4 Hits the Mark
Compared to other vendors in the industry, those numbers are impressive. I personally still have concerns about the ability of Cisco to impress the Service Providers... when I compare "the Cisco way" with the way that other big beasts (Nortel, Lucent, Ericsson, Alcatel) deliver their products, I still think that Cisco has a long way to learn about quality and bug resolutions BEFORE releasing the product.

In any case, well done Cisco.
jes
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jes,
User Rank: Light Beer
12/5/2012 | 3:45:18 AM
re: Cisco Q4 Hits the Mark
You said that right.... the heading "Hits the Mark" is off the mark !

Its a record quarter for Cisco and shows that Cisco can grow even faster !!!
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