AP
Cisco earnings up 4 percent, beating forecastsTuesday August 5, 6:51 pm ET
By Peter Svensson, AP Technology Writer
Cisco profits rise 4 percent and beat estimates, but economic woes could trim future results


NEW YORK (AP) -- Cisco Systems Inc. said Tuesday that sales would be weaker than analysts had forecast in the next few quarters, but investors who had expected worse were cheered.

The world's largest maker of computer networking gear said orders would grow 8 percent in the current quarter, as customers, particularly telecom carriers, pinch their money.

Investors had been expecting the weak economy to catch up to the company. It's the dominant player in an industry that has been growing dramatically, but at the same time, its routers and switches are capital investments, the kind that suffer in an economic downturn.

Cisco shares were up $1.58, or 7 percent, at $24.25 in extended trading after the release of the results. The stock has slid from the year's high of $27.72 set June 5 as investors prepared for a weak forecast.

For the fiscal fourth quarter that ended July 25, Cisco reported earnings of $2.01 billion, or 33 cents per share. In the same period last year, Cisco earned $1.93 billion, or 31 cents per share.

Sales rose 10 percent to $10.4 billion.

Excluding one-time items, earnings were 40 cents per share. Analysts had expected Cisco to report earnings of 39 cents per share on $10.3 billion in revenue, according to a Thomson Financial poll.

Chief Financial Officer Frank Calderoni said the results, coming in "a quarter of somewhat uncertain macroeconomic conditions," demonstrated the strength of the company's business model.

Analyst Paul Mansky said the fourth-quarter results appeared to be "reasonably solid, well-balanced."

But looking ahead, Chief Executive John Chambers said revenue for the current quarter, the fiscal first, would grow by 8 percent from a year ago, suggesting revenue of $10.3 billion. Analysts had been expecting revenue of $10.4 billion.

For the following quarter, which ends in January, Chambers predicted revenue growth of 8.5 percent, pointing to sales of $10.7 billion. Analysts had been looking for $10.8 billion.

Speaking on a conference call to discuss results for the fiscal fourth quarter, Chambers said uncertainty in the economy meant that the company would not provide a full-year outlook as it usually has.

The company's long-term goal is to grow revenue by 12 percent to 17 percent year-over-year, he said, but it was unclear when it could return to that level.

Chambers said order growth from telecom service providers, which account for almost a third of sales, was "moderating," but emphasized that this is coming after three years of rapidly growing spending.

On a brighter note, orders from large enterprise customers showed signs of a recovery.

"The large multinationals and financial institutions which were the first ones to decline almost a year ago, in terms of their spending with us now, are doing dramatically better," Chambers said.

U.S. enterprise sales growth was 13 percent in the fourth quarter, up from 6 percent in the third quarter.

In the just-ended fiscal year, Cisco's earnings were $8.1 billion, or $1.31 per share, on sales of $39.5 billion. In the previous fiscal year, net income was $7.3 billion on revenue of $34.9 billion.