Cisco celebrates better than expected Q1 report

Wall Street could heave a collective sigh of relief after networking powerhouse Cisco Systems Inc. on Monday reported first quarter earnings that beat analysts predictions by a penny.

Earnings excluding one-time charges for the quarter ended October 28, 2000, were US$1.36 billion, or 18 cents a share, up from $814 million, or 11 cents a share, in the same quarter a year ago, Cisco said in a statement. Financial analysts had expected the company to profit by 17 cents a share, according to 32 brokers polled by First Call/Thomson Financial.

"We are very pleased with the solid balance across our major geographies, lines of business and product families," said John Chambers, Cisco's president and chief executive officer, in a conference call with press and analysts.

In a difficult market, Cisco attributed its eleventh consecutive quarter of continued revenue and earnings growth to its ability to offer "end-to-end Internet solutions for each of its key markets," something not offered by its closest competitors, Chambers said.

"It was a very strong quarter. This was especially fortunate given the many challenges some of our peers have experienced," Chambers said.

The past two weeks has seen Lucent Technologies fire its chief executive officer, Rich McGinn, after the company forecasted weak quarterly earnings, and Nortel Networks announced earnings that failed to meet Wall Street expectations.

Net income for the quarter was $798 million, or 11 cents per share, compared with $415 million, or 6 cents per share, reported for the same period a year ago, Cisco said.

Net sales increased 66 per cent to $6.52 billion, compared with $3.92 billion in the first quarter of fiscal 2000, Cisco said.

During the first quarter, Cisco completed the acquisitions of HyNEX, IPmobile, Komodo Technology, Netiverse and NuSpeed for a combined price of about $1.37 billion. The company took a related charge of approximately $509 million, or 11 cents per share, as a write-off of purchased in-process research and development, Cisco said.

Cisco's main challenge comes from the stiff competition it faces throughout the telecommunications market, Chambers said. But thanks in part to its "healthy paranoia that makes Andy Grove look relaxed," Cisco can break away in the service provider market "in the same way that we've broken away in the enterprise market," Chambers said, referring to Intel Corp. Chairman and Cofounder Andy Grove's famous business strategy book, "Only the Paranoid Survive."

Cisco announced its report after the Nasdaq stock market closed. The company's shares closed down $1.62 for the day, or 2.86 percent, at $55.12 per share.

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