Cisco Beats Earnings Expectations

Cisco Systems Inc. Tuesday reported mixed results for its second fiscal quarter of 2003, which ended Jan. 25.

The San Jose, Calif., networking behemoth beat Wall Street earnings expectations by a penny, reporting 14 cents a share in earnings—compared with 8 cents a share in the first quarter. But revenues, at $4.7 billion, were off slightly from Wall Street projections, and down from both the first quarter of fiscal 2003 and the same quarter a year earlier.

Cisco reported a net income of $991 million for the quarter, compared with $660 million for the same quarter last year and $618 million in the first fiscal quarter for 2003.

"With the exception of revenues, we achieved some of the best financial measurements in our history," said John Chambers, Ciscos CEO. Still, "the economy remains a show-me economy. We are seeing even more conservative attitudes from CEOs than just one quarter ago. We did see a bit more weakness in the first three weeks of January among enterprise customers," added Chambers.

Ciscos sales breakdown across its major product areas for the quarter saw routers making up 26 percent of total revenue; switches taking 41 percent of revenues; access products representing 5 percent; services, 17 percent; with other—including optical products and software—making up 11 percent.

During the quarter Cisco saw router share gains especially at the high end with its Cisco 12000 router line, with new chassis orders up sequentially by 20 percent. Switching orders were flat for the quarter. In the service provider market segment, Cisco saw a flat to slight increase across all of its geographies. In the nine growth markets that Cisco has targeted, it saw double-digit growth. Included in those areas are IP telephony, security, wireless, storage and optical networking.

During the quarter, Cisco signed a marketing and resale pact with SBC Communications Inc. to roll out a new class of managed business services that also calls for SBC to use Cisco IP networking technology in its core network. Cisco also signed a resale agreement with Lucent that calls for Lucent to integrate Cisco packet data and media gateway products into its mobile service provider market. Cisco also completed its acquisition of security provider Psionic Software Inc. and announced its intention to acquire Okena Inc., another network security provider.

For its third fiscal quarter of 2003, Cisco expects to see revenues that are flat or down slightly by 2 percent or 3 percent.