Optical/IP Networks

Cisco Soars in Q1

Cisco Systems Inc. (Nasdaq: CSCO) appears to be firing on all cylinders, as the company beat analyst estimates with its first-quarter earnings and claimed solid growth on all fronts.

Pro forma earnings per share hit 31 cents, compared with analyst estimates of 29 cents as tallied by Reuters Research . Moreover, for its second quarter, which ends in January, Cisco is forecasting revenues of $8.22 billion to $8.29 billion, eclipsing the $8.05 billion analysts were expecting, according to Reuters.

Cisco's forecast represents revenue growth of 24 or 25 percent from the second quarter a year ago -- or 14 to 15 percent, if you don't count the Scientific Atlanta acquisition.

The bullish forecast helped push Cisco stock up $2.29 (9.1%) to $27.39 in after-hours trading during the call. It continues the optimism that Cisco presented with its fourth-quarter earnings in August. (See Cisco Q4 Hits the Mark.)

"The balance was amazingly good everywhere," CEO John Chambers told analysts on a conference call today, noting that it was unusual and a bit lucky for all product sectors to have done well. "Eight of our top 10 products [ranked by revenues] had order growth rates in excess of 20 percent."

Even optical grew, in the mid-20 percent range, Chambers said. Cisco isn't spelling out optical revenues any more, and the sector has been removed from the slate of "advanced technologies" that Cisco targets as potential $1 billion businesses. Chambers also said that Cisco during the quarter had claimed the No. 1 position in metro DWDM.

Those statements might have been an attempt to counter talk that Cisco is losing interest in optical. Cuts to the optical group have continued since a year ago, and there's been ongoing speculation about Cisco cutting focus on optical. (See Optical: Cisco's Odd Man Out?)

The service provider sector in general grew in the "low 20 percent" range, compared with a year ago, Chambers said.

As he did last quarter, Chambers singled out the CRS-1 core router, saying it collected $110 million in first-quarter revenues, up from $80 million in the fourth quarter. "Order momentum was even stronger, with approximately $150 million in orders" versus $120 million in the previous quarter, he said.

For its first quarter, which ended Oct. 28, Cisco reported profits of $1.6 billion, or 26 cents per share, on revenues of $8.2 billion, compared with profits of $1.5 billion, 25 cents per share, on revenues of $8 billion the previous quarter. (See Cisco Reports Q1.)

For its first quarter a year ago, Cisco reported profits of $1.3 billion, or 20 cents per share, on revenues of $6.6 billion.

— Craig Matsumoto, Senior Editor, Light Reading

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