Second-quarter results come in above the mark, and Cisco says it's not slowing down

Craig Matsumoto, Editor-in-Chief, Light Reading

February 6, 2007

2 Min Read
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

About the Author(s)

Craig Matsumoto

Editor-in-Chief, Light Reading

Yes, THAT Craig Matsumoto – who used to be at Light Reading from 2002 until 2013 and then went away and did other stuff and now HE'S BACK! As Editor-in-Chief. Go Craig!!

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