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Optical/IP

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

Pete Baldwin 12/5/2012 | 3:35:25 AM
re: Cisco Soars in Q1 Well, jeez. According to Cisco, life is wonderful across the board - all products, all geographies. Lots of "low- to mid-20s" growth for different areas.

It really was uber-bullish, to quote Chipgeek.
http://www.lightreading.com/bo...

Chambers tossed the word "luck" into there at least once ... obviously if you're Cisco, you don't want people to start expecting this every quarter.

So was Cisco good, or lucky? what's the ratio -- 40/60? 90/10?
nyc 12/5/2012 | 3:35:24 AM
re: Cisco Soars in Q1 Its all good no luck... Didn't Nortel just say they see SP's slowing spending down... I didn't hear that from Cisco on todays conf call. I think they have so much momentum in SP that they will continue to grow... How many companies of that size have that kind of productivity numbers per employee and continue to grow at 24 - 25% year over year???????

NYC
chip_mate 12/5/2012 | 3:35:23 AM
re: Cisco Soars in Q1 Vendor messages to their Audiences:

Nortel=Ford Motors
"we're seeing a slowdown across the board..."

Cisco=Toyota
"we just built another plant in Texas to meet customer demand..."
High-Tide 12/5/2012 | 3:35:21 AM
re: Cisco Soars in Q1 Interesting analogy, but not quite accurate.

http://www2.nortel.com/go/news...

According to the press materials available on the Nortel web site, Q3 revenue was up 17%, and Nortel experienced growth in all sectors. The challenge is the profit margin - Nortel needs to increase that margin at least a couple of percentage points to meet targets. Here is a quote from the web site on outlook:

"For the fourth quarter of 2006, we expect revenue growth in the mid to high single digits compared to the fourth quarter of 2005, gross margin to be between 38 and 39 as a percentage of revenue and spending to be approximately flat compared to the fourth quarter of 2005. Based on this fourth quarter outlook, we now expect mid to high single digit revenue growth for the full year 2006 compared to 2005, full year gross margin to be between 38 and 39 as a percentage of revenue, and we continue to expect operating expenses to be flat to up slightly from 2005."

prs6str 12/5/2012 | 3:35:09 AM
re: Cisco Soars in Q1 "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. "

That's incredible growth for the CRS-1. Looks like it's on it's way to being a $B product for Cisco. The question I'd ask is...how much of that revenue is a substitute for GSR revenue vs. taking share from Juniper? Does anyone have a list of the wins that would be considered competitive wins vs. moving from GSR to CRS-1?

Juniper must be in an interesting position in terms of R&D investment given the incredible threat from Cisco in the core while trying to move into the enterprise. The core is Juniper's current position strength. If they don't defend while executing, Cisco could put the squeeze on from both sides which could create a more fragmented #2 position in the market.

I imagine Cisco would like another competitor to emerge and cause Juniper troubles so that they'd have to watch their back in addition to Cisco. Should make for a few interesting next couple years...

BTW, I'm not sure luck had much to do with Cisco's execution. They seem to be back on track...maybe a little lucky...
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