Cisco sales jump 27% in quarter CEO calls best ever

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Cisco Systems Inc. reported quarterly sales and profits Wednesday that beat expectations, and signaled that technology spending will continue to strengthen as economic conditions improve.

"We witnessed a return to strong, balanced growth across geographies, products and customer segments that we haven't seen since before the global economic challenges began," said John Chambers, chief executive of Cisco.

The past three months, he added, were "probably the strongest quarter in our history."

The San Jose, Calif.-based network equipment maker reported net income of $2.2 billion, or 37 cents per share, in the quarter ended May 1, compared with $1.8 billion, or 30 cents a share, in the year-earlier quarter.

Excluding certain items, Cisco said it earned $2.5 billion, or 42 cents per share. Analysts surveyed by Thomson Financial, who typically exclude one-time items from their estimates, forecasted earnings of 39 cents per share.

Sales rose 27% in the quarter to $10.4 billion. Analysts had expected sales of $10.2 billion.

The company posted double-digit sales gains across all geographic regions, including a 30% increase in Europe.

Looking ahead, Cisco (CSCO, Fortune 500) expects revenue for the ongoing quarter -- the fourth in its fiscal year -- to increase between 25% and 28% compared to last year. That forecast includes sales from video communications company Tandberg, which Cisco bought this quarter.

Cisco's guidance is an increase from its previously forecasted sales gain of 23% to 26%. Analysts were expecting sales to increase 25% in the current quarter.

"The message is that the recovery in tech spending continues, despite what's happening in Europe," said Mark McKechnie, an analyst who covers Cisco at Broadpoint AmTech.

Many analysts were expecting a more cautious outlook given the recent economic turmoil in Europe, where Cisco derives 20% of its revenue. But the company's chief executive said in a conference call that Cisco expects "reasonably good growth" in Europe.

The ongoing debt crisis overseas "had everybody's attention last week, but we haven't seen anything unusual from our teams," Chambers said, adding that the company is "cautiously optimistic" that European leaders will resolve the current crisis.

"There's optimism building on a global basis," he continued. "I have very few pessimistic customers at this time."

Chambers acknowledged that the global economy remains fragile and that businesses remain "gunshy," particularly when it comes to hiring. But he said companies are interested in increasing productivity through technology, which bodes well for his industry.

"Cisco is participating in this recovery with a solid product line-up," said McKechnie. "If anything slows them down it would be the economic situation in Europe, but they've factored that into their guidance." To top of page

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