Cisco posts revenue, profit gains for Q3

Cisco reported growth in revenue and profit for its fiscal third quarter.

Cisco has reported revenue in its fiscal third quarter was $US7.3 billion, up from $US6.2 billion in last year's third quarter, as the company's business grew in the US and emerging markets.

Net income was $US1.4 billion or $US0.22 per share, including a stock-based compensation expense that the company did not include last year. With that expense applied to the results from a year earlier, Cisco would have reported net income of $US1.2 billion, the company said.

Not using generally accepted accounting principles, Cisco's net income was $US1.8 billion or $US0.29 per share, beating the consensus estimate of $US0.26 per share from analysts polled by Thomson Financial. The company also surpassed the consensus estimate for revenue of $US7.17 billion.

During the quarter, which ended April 29, Cisco closed its acquisition of video infrastructure vendor, Scientific-Atlanta, which contributed $US407 million in net sales.

For its fourth quarter, Cisco expects product orders to increase between 10 per cent and 12.5 per cent for its traditional business. Including Scientific-Atlanta, it expects revenue to be 18 per cent to 21 per cent higher when compared to year-earlier results for Cisco alone.

The third-quarter results were driven strongly by growth in the US and Canada, which together make up 52 per cent of Cisco's business, President and CEO, John Chambers, said following the release of the results. Product orders grew about 20 per cent, year over year, for the second consecutive quarter, he said. The growth occurred across the enterprise, commercial and service provider market segments, he said.

Chambers told analysts he was more optimistic now than after the previous quarter.

Percentage growth for enterprise orders worldwide was in the low teens, commercial orders in the 20s and service provider orders in the high teens, Chambers said.

Growth of about 5 per cent in the company's routing business was driven by the strength of its Integrated Services Router for small and medium businesses and branch offices, as well as its 7600 Series routers.

Strong sales of the Catalyst 6500 platform helped drive 13 per cent switching revenue growth. Enterprise IP (Internet Protocol) communications, which includes IP phones and related products, grew about 40 per cent, while Cisco sold its 8 millionth phone during the quarter.

Results in some emerging countries showed major growth, as product orders in the Middle East and Africa increased about 70 per cent. Russia, Latin America and India showed order increases of about 40 per cent. But China remained relatively flat, Western Europe had less than 10 per cent order growth, and Japan continued to be weak, though it may have bottomed out, Chambers said.

Cisco is optimistic about growth in two emerging technology areas where it has made big investments. Enterprises are buying power-over-Ethernet ports, which can power IP phones and other devices, at about five times the rate they are ordering actual handsets, according to Charles Giancarlo, senior vice-president and chief development officer.

That indicated they were readying their networks for future deployments of IP telephony and other advanced technologies, he said. And with deals to provide video gear to BT Group and Deutsche Telekom, Giancarlo expected to see initial commercial deployments of carrier video services to consumers in Cisco's next fiscal year, beginning in August, and a significant revenue stream to Cisco from this technology in the following fiscal year.

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